Reference no: EM132674936
Gossett Company acquired a machine for P6,400,000 on August 31, 2016. The machine has a 5-year useful life, a P 1,000,000 residual value, and was depreciated using the straight line method. On May 31, 2019, a test for recoverability revealed that the expected net future undiscounted cash inflows related to the continued use and eventual disposal of the machine amount to P3,000,000. The fair value less cost of disposal of the machine May 31, 2019 is P2,700,000 with no residual value.
Problem 1: What is the carrying amount of the machine on May 31, 2019? (prior to recognition of impairment, if any)
Problem 2: What is the impairment loss recognized on May 31, 2019?
Problem 3: What is the carrying amount of the machine on December 31, 2019?
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