Question

 Bagong Silangan Company currently performs an annual test of the impairment of goodwill relating to its textile division, considered a cash-generating unit. At December 31, 2019, Goodwill has a ledger balance of P400,000. The ledger balances of the productive assets in this cash generating unit are as follows at December 31, 2019.

 

Land   P5,000,000

Building, net accumulated depreciation of P3,400,000     6,200,000

Patents    1,000,000

Trademarks      800,000

 

 

REQUIRED:

Give the entry to record impairment, if any, assuming that the recoverable amount of the cash generating unit is: P13,100,000

Answer 1

Since the impairment loss is less than the carrying amount of goodwill that accumulated to 100,000. No further effects to other assets from the group shall be made.

 

	Recoverable amount of the CGU					P  13,100,000
	Carrying amount of the CGU, including goodwill					13,400,000
	Impairment loss					P    300,000
	JOURNAL ENTRY:
		Impairment loss			300,000
			Goodwill			300,000

Impairment loss			300,000
	Goodwill			300,000