Autobots Bottling purchased for P800,000 a trademark for a very successful soft drink it markets under the name OK!, The trademark was determined to have an indefinite life. A competitor recently introduced a product that is in direct competition with the OK!, thus suggesting the need for an impairment test. Data gathered by Autobots suggests that the useful life of trademark is still indefinite, but the cash flows expected to be generated by the trademark have been reduced either to P30,000 per year (with a probability of 80%) or to P60,000 per year (with 20% probability). The appropriate risk-free interest rate is 10%. The appropriate risk- adjusted interest rate is 5%. The loss on impairment of trademark is A . 440,000 B. 320,000 C. 200,000 D. 80,000
Autobots Bottling purchased for P800,000 a trademark for a very successful soft drink it markets under the
name OK!, The trademark was determined to have an indefinite life. A competitor recently introduced a
product that is in direct competition with the OK!, thus suggesting the need for an impairment test. Data
gathered by Autobots suggests that the useful life of trademark is still indefinite, but the cash flows
expected to be generated by the trademark have been reduced either to P30,000 per year (with a
probability of 80%) or to P60,000 per year (with 20% probability). The appropriate risk-free interest rate is
10%. The appropriate risk- adjusted interest rate is 5%. The loss on impairment of trademark is
A
.
440,000 B. 320,000 C. 200,000 D. 80,000
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