At the end of 2022, Sapporo Group tests a machine for impairment. The machine is carried at depreciated historical cost, and its carrying amount is ¥150,000. It has an estimated remaining useful life of 10 years. The machine’s recoverable amount is determined on the basis of a value-in-use calculation, using a pretax discount rate of 15%. Management-approved budgets reflect estimated costs necessary to maintain the level of economic benefit expected to arise from the machine in its current condition. The following information related to future cash flows is available at the end of 2022 amounts in thousands; round all calculations to the nearest ¥.

Instructions

Part I
a. Compute the amount of the impairment loss at December 31, 2022.

b. Prepare the journal entry to record the impairment loss, if any, at December 31, 2022.

Part II
In the years 2023–2025, no event occurs that requires the machine’s recoverable amount to be re-estimated. At the end of 2026, costs of ¥25,000 are incurred to enhance the machine’s performance. Revised estimated cash flows in management’s most recent budget are as follows.

c. Prepare the journal entry for an impairment or reversal of an impairment at December 31, 2026.

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Year Future Cash Flow Year Future Cash Flow 2023 ¥22,165 2028 ¥24,825 2024 21,450 2029 24,123 2025 20,550 2030 25,533 2026 24,725 2031 24,234 2027 25,325 2032 22,850