Question
During preparation of financial statements for the year ended 31 December 20X3, management of Swimmers Co. performs impairment testing of its assets. There was an
During preparation of financial statements for the year ended 31 December 20X3, management of Swimmers Co. performs impairment testing of its assets. There was an external indication that boat operating in Aquatica river might be impaired.
Acquisition cost of boat was 600 000 EUR (in January 20X1), its useful life is 10 years and Swimmers apply cost model with straight-line depreciation method. Based on current market research, Swimmers' managers estimate current market value of boat to 316 000 EUR. In the case of sale, Swimmers would have to bear costs of final cleaning and preparation estimated to 14 000 EUR.
Value in use calculated in the previous example represents 326 926 EUR.
Calculate impairment loss of boat as of 31 December 20X3 and show the appropriate accounting treatment.
Calculate depreciation charge of boat for the year 20X4.
1. Calculation of carrying amount: 2. Calculation of recoverable amount: Value in use: Fair value less cost to sell (31600014000) Recoverable amount as of 31 Dec 203 (higher of): 1. Calculation of carrying amount: 2. Calculation of recoverable amount: Value in use: Fair value less cost to sell (31600014000) Recoverable amount as of 31 Dec 203 (higher of)Step by Step Solution
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