Question
(A) A machine was purchased on 1 January Year 1 for Rs. 80,000. It had a useful life of 8 years and no residual value.
(A)A machine was purchased on 1 January Year 1 for Rs. 80,000. It had a useful life of 8 years and no residual value. On 31 December Year 4 the machine was classified as held for sale. On this date the machines fair value was estimated at Rs. 50,000 and the costs to sell were estimated at Rs. 1,000 The machine was sold for Rs. 48,000 on 30 June Year 5.
Required: How this would be accounted for in the books of accounts?
(B) On 1 January Year 1 Entity Q purchased for Rs. 240,000 a machine with an estimated useful life of 20 years and an estimated zero residual value. Depreciation is on a straight-line basis. The asset had been re-valued on 1 January Year 3 to Rs. 250,000, but with no change in useful life at that date. On 1 January Year 4 an impairment review showed the machines recoverable amount to be Rs. 100,000 and its remaining useful life to be 10 years. Required: a) The carrying amount of the machine on 31 December Year 2 and hence the revaluation surplus arising on 1 January Year 3. b) The carrying amount of the machine on 31 December Year 3 (immediately before the impairment). c) The impairment loss recognised in the year to 31 December Year 4. d) The depreciation charge in the year to 31 December Year 4.
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