Lloyd's Production Ltd. has accounting year ending 31 December each year. The business purchased equipment and plant costing $5m on January 1, 2015 and entered into a contractual agreement to produce specialized units of input for Shawn Auto Limited. The estimated useful life of the plant and equipment is 10 years with a residual value of $250,000. On December 31, 2018 an impairment review was carried out and it was concluded that the equipment and plant has a further estimated useful life of four years and its fair value was S4m. The recoverable amount for this non-current asset was $3.9m. On January 1, 2012 Shawn Auto Limited informed Lloyd's Production Ltd that it will no longer place orders for the units produced by the business. As a result of this undesired news, Lloyd's Production Ltd revised its estimated net cash inflows earned from the equipment and plant for the next three years as follows: Year ended 31 December: 2019 2020 2021 1,900,000 1,450,000 900.000 West Indies Limited cost of capital is 16% which results in the following discount factors: Value of $1 at 31 December: 2019 2020 2021 0-8621 0-7432 0-6407 Required: Calculate the carrying amount of the equipment and plant to be shown in the Statement of Financial Position for the years 2015 to 2018 and state what should be the value of the plant and equipment following the impairment review? Calculate the Value in Use of the Plant & Equipment following the bad news received by Lloyd's Production Ltd. Lloyd's Production Ltd. has accounting year ending 31 December each year. The business purchased equipment and plant costing $5m on January 1, 2015 and entered into a contractual agreement to produce specialized units of input for Shawn Auto Limited. The estimated useful life of the plant and equipment is 10 years with a residual value of $250,000. On December 31, 2018 an impairment review was carried out and it was concluded that the equipment and plant has a further estimated useful life of four years and its fair value was S4m. The recoverable amount for this non-current asset was $3.9m. On January 1, 2012 Shawn Auto Limited informed Lloyd's Production Ltd that it will no longer place orders for the units produced by the business. As a result of this undesired news, Lloyd's Production Ltd revised its estimated net cash inflows earned from the equipment and plant for the next three years as follows: Year ended 31 December: 2019 2020 2021 1,900,000 1,450,000 900.000 West Indies Limited cost of capital is 16% which results in the following discount factors: Value of $1 at 31 December: 2019 2020 2021 0-8621 0-7432 0-6407 Required: Calculate the carrying amount of the equipment and plant to be shown in the Statement of Financial Position for the years 2015 to 2018 and state what should be the value of the plant and equipment following the impairment review? Calculate the Value in Use of the Plant & Equipment following the bad news received by Lloyd's Production Ltd
