Intangible Asset & Impairment PT Cabo is operating in the cosmetics industry. A company-owned machine was purchased on January 1, 2019 for Rp50,000,000. The machine is depreciated on a straight line basis over 10 years with no residual value. Machine is typically used to manufacture a brand of whitening cream. At the end of 2021, the company faced a lawsuit from a customer named Ms. Yuna. She claims that the whitening cream product caused her skin to blacken and experience serious irritation. The lawsuit had a serious impact on product sales. According to the company's research division report, if the machine is still used, the value-in-use arising from the machine is only Rp15,000,000. Conversely, if the machine is sold, the company will receive Rp18,700,000, before deducting 10% of the selling price for selling costs. At the end of 2022, the trial process revealed that Ms. Halilintar accusations were just hoaxes. The company sued Ms. Boni until she was finally imprisoned. Now, the company estimates that the recoverable amount of the machines is Rp40,000,000. Instructions: a. Determine the amount of the impairment loss that needs to be recognized on December 31, 2021! b. Prepare all the necessary journal entries (including depreciation) on December 31, 2021! c. Determine the recovery of impairment loss that needs to be recognized on December 31, 2022 d. Prepare all the necessary journal entries (including depreciation) on December 31, 2022!

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter7: Operating Assets

Section: Chapter Questions

Problem 67E

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Chapter : Intangible Asset & Impairment PT Cabo is operating in the cosmetics industry. A company-owned machine was purchased on January 1, 2019 for Rp50,000,000. The machine is depreciated on a straight line basis over 10 years with no residual value. Machine is typically used to manufacture a brand of whitening cream. At the end of 2021, the company faced a lawsuit from a customer named Ms. Yuna. She claims that the whitening cream product caused her skin to blacken and experience serious irritation. The lawsuit had a serious impact on product sales. According to the company's research division report, if the machine is still used, the value-in-use arising from the machine is only Rp15,000,000. Conversely, if the machine is sold, the company will receive Rp18,700,000, before deducting 10% of the selling price for selling costs. At the end of 2022, the trial process revealed that Ms. Halilintar accusations were just hoaxes. The company sued Ms. Boni until she was finally imprisoned. Now, the company estimates that the recoverable amount of the machines is Rp40,000,000. Instructions: a. Determine the amount of the impairment loss that needs to be recognized on December 31, 2021! b. Prepare all the necessary journal entries (including depreciation) on December 31, 2021! c. Determine the recovery of impairment loss that needs to be recognized on December 31, 2022 d. Prepare all the necessary journal entries (including depreciation) on December 31, 2022!

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