Question
Edu Innovations acquired a digital learning platform on 1 January 20X2 for $3,000,000 with an estimated residual value of $300,000 and an estimated useful life
Edu Innovations acquired a digital learning platform on 1 January 20X2 for $3,000,000 with an estimated residual value of $300,000 and an estimated useful life of 10 years. The company uses the straight-line depreciation method. Due to changes in the online education market, the company now forecasts the following net cash inflows: $400,000 on 31 December 20X4, $350,000 on 31 December 20X5, and $300,000 on 31 December 20X6. The present values of $1 at the end of each year, using a discount rate of 6%, are: 0.94 for year 1, 0.89 for year 2, and 0.84 for year 3. Required: Assess the recoverable amount, calculate the impairment loss, and prepare the necessary journal entries and financial statement disclosures as of 31 December 20X4.
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