Question
MegaConstruct bought a production plant at a cost of $950,000, with an estimated residual value of $65,000 and an estimated useful life of six years.
MegaConstruct bought a production plant at a cost of $950,000, with an estimated residual value of $65,000 and an estimated useful life of six years. The company uses the straight-line depreciation method. Expected net cash inflows from the plant are $260,000 on 30 June 20X3, $210,000 on 30 June 20X4, and $200,000 on 30 June 20X5. The values of $1 at the end of each year are 0.92 for year 1, 0.85 for year 2, and 0.78 for year 3. Required: Determine the recoverable amount and impairment loss, if any, and prepare the balance sheet extract as of 30 June 20X3.
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