Question
Msibi Limited purchased machinery at R500 000 on 30 June 2013. It is the companys policy to depreciate fully machinery of this kind using straight
Msibi Limited purchased machinery at R500 000 on 30 June 2013. It is the companys policy to depreciate fully machinery of this kind using straight line method at 20% p.a. Msibi Limiteds year end date is 31 September of each year. In August 2015, the machinery developed a mechanical fault and on 31 September 2015 the directors decided to test it for impairment.
The following details were provided by the companys financial director:
- Value in use of the machinery in its state now is R250 000
- The fair value of the machinery reference to the market is R258 000
- Selling this asset will cost the company R10 000
What is the impairment loss that should be recognized in the statement of profit or loss and other comprehensive income for the year ended 31 September 2015?
Select one:
a. R25 000
b. R17 000
c. R35 000
d. R27 000
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