Juan Company purchased four convenience store buildings on January 1, 2015 for a total of P25,000,000. The buildings have been depreciated using the straight-line method with a 20-year useful life and 10% residual value. On January 1, 2021, Juan has converted the buildings into a hotel and restaurant. Because of the change in the use of the buildings, Juan is evaluating the buildings for possible impairment. Juan estimates that the buildings have a remaining useful life of 10 years, that their residual value will be zero, that net cash inflows from the buildings will total P1,500,000 per year, and that the current fair value of the four buildings totals P10,000,000. The appropriate discount rate is 12%. The present value of an ordinary annuity of 1 at 12% for 10 periods is 5.65. What impairment loss should be recognized for 2021?

Juan Company purchased four convenience store buildings on January 1, 2015 for a total of P25,000,000. The buildings have been depreciated using the straight-line method with a 20-year useful life and 10% residual value. On January 1, 2021, Juan has converted the buildings into a hotel and restaurant. Because of the change in the use of the buildings, Juan is evaluating the buildings for possible impairment. Juan estimates that the buildings have a remaining useful life of 10 years, that their residual value will be zero, that net cash inflows from the buildings will total P1,500,000 per year, and that the current fair value of the four buildings totals P10,000,000. The appropriate discount rate is 12%. The present value of an ordinary annuity of 1 at 12% for 10 periods is 5.65. What impairment loss should be recognized for 2021?

Name: Juan Company purchased four convenience store buildings on January 1,
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Description: Juan Company purchased four convenience store buildings on January 1, 2015 for a total ofP25,000,000. The buildings have been depreciated using the straight-line method with a 20-year usefullife and 10% residual value. On January 1, 2021, Juan has c

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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