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help Question 1 Cupcake Inc.built a plant facility and started commercial production in January 2018. The plant facility had a capital cost of $4 100,000.
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Question 1 Cupcake Inc.built a plant facility and started commercial production in January 2018. The plant facility had a capital cost of $4 100,000. The capital assets were depreciated, starting in 2018, on a straight-line basis assuming a residual value of 10% of the onginal cost, a 20-year useful life for the plant facility. Cupcake claimed a full year of depreciation in 2018. In December 2022, the market for Cupcake' products declined precipitously because of a significant improvement in similar new competing products that are being sold for a lower price. Operations in the plant were temporarily suspended while inventory was reduced Assume that the plant facility is an asset group for the purposes of determining a write down, any. The fair value of this asset group is $3,149,080. the asset group were sold, Cupcake would incur a 2% brokerage fee along with legal and other selling costs of $120,000 The following probability-weighted future cash flow information is available (assume all cash flows occur at the end of the year, unless otherwise noted): Year >> Dec2023 Dec2024 Dec2025 Dec2026 Dec2027 CASH FLOWS Sales revenue Cost of goods sold Other operating costs 1,650,000 (950,000) (79,000) 1,650,000 (950,000) (79,000) 1,650,000 1950,000) (79,000) 1,650,000 (950,000) (79,000) 1,650,000 1950,000) (79,000) 621,000 621,000 621,000 621,000 621,000 The relevant discount rate is 7%. Because of the various changes in the business, Cupcake anticipates that it will now use the plant facility and equipment until December 2027, after which it will shut down. REQUIRED: Assume the assets are being accounted for under the cost model (as opposed to the revaluation model). Answer the following questions: 1. What is the definition of "recoverable amount"? Compute the recoverable amount of the CGU in this question. Show your work 2. Ignore your answer to part 1. Assume the value in use amount for this CGU is $3,100,000 Prepare the journal entry to record the write down of this CGU. 3. Under IFRS, can this impairment write down be reversedStep by Step Solution
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