Arrow Ltd acquired a machine for $249,000 on 1 July 2016. It depreciated the asset at 9%
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Question:
Arrow Ltd acquired a machine for $249,000 on 1 July 2016. It depreciated the asset at 9% p.a. on a straight-line basis. On 30 June 2018, Arrow Ltd conducted an impairment test on the asset. It determined that the asset could be sold to other entities for $154,000 with costs of disposal of $2,000. Management expect to use the machine for the next four years with expected cash flows from use of the machine being as follows:
2019 $80,000
2020 $60,000
2021 $51,000
2022 $39,000
The rate of return expected by the market on this machine is 8%.
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