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The carrying amount of a cash-generating unit is €900,000
The carrying amount of a cash-generating unit is €900,000. This consists of goodwill €250,000 and property, plant and equipment €650,000. The cash-generating unit has a recoverable amount of only €520,000.
How is the impairment loss allocated to the assets of the cash-generating units?
Group of answer choices
Goodwill is decreased by €190,000, and PP&E by €190,000
Goodwill is decreased by €250,000, and PP&E by €130,000
PP&E is decreased by €380,000, goodwill will not change.
Goodwill is decreased by €130,000, and PP&E by €250,000
Expert Solution
| Goodwill is decreased by €250,000, and PP&E by €130,000 | ||
| Carrying amount of a cash-generating unit | 900,000 | |
| Less: Recoverable amount | 520,000 | |
| Impairment loss | 380,000 | |
| 250,000 of this loss is allocated to the goodwill, reducing it to zero. | ||
| The remaining £130,000 is allocated to the property, plant, and equipment. | ||
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