Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN: 9781285190907
Author: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher: Cengage Learning
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Chapter 6, Problem 19PC
a
To determine
Explain the suitable treatment for the given items.
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On January 1, 2017, the Ilocos Norte Corporation purchased the business of its competitor in a business combination. The total purchase price was at P15M. The only identifiable asset of the said competitor included a factory building with a fair value of 3,600,000 and 2 machineries with a fair market value of P6M (Mach A) and P4M (Mach B). The acquired business is considered a separate business segment distinct from all other operations of Ilocos Norte Corporation. The factory building was estimated to have a 30-year remaining useful life while machineries were estimated to have a fifteen and twenty-year useful lives for machinery A and B, respectively. Assets are to be depreciated using straight-line method to zero residual values. Late in 2021, because of technological changes in the industry and reduced selling prices for its products, the company believes that its asset(s) of this business segment have been impaired. The company estimates that the business segment will produce…
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Financial Reporting, Financial Statement Analysis and Valuation
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