Question
GreenTech acquired a renewable energy research center on 1 January 20X1 for $5,000,000 with an estimated residual value of $500,000 and an estimated useful life
GreenTech acquired a renewable energy research center on 1 January 20X1 for $5,000,000 with an estimated residual value of $500,000 and an estimated useful life of 20 years. The company uses the straight-line depreciation method. Due to changes in the renewable energy market, the company now forecasts the following net cash inflows: $700,000 on 31 December 20X4, $650,000 on 31 December 20X5, and $600,000 on 31 December 20X6. The present values of $1 at the end of each year, using a discount rate of 7%, are: 0.93 for year 1, 0.87 for year 2, and 0.81 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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