Question
On 1 January 2017 Rom limited purchased a Machine for $150,000 and the estimated useful life of the Machine is 6 years having no residual
On 1 January 2017 Rom limited purchased a Machine for $150,000 and the estimated useful life of the Machine is 6 years having no residual value. Machine depreciated based on Straight-line method. After 4 years of use, on 31 December 2020, the company decided to make an impairment test on the above machinery. On that day, the machinerys fair market value was $46,000 after spending a selling cost of $5,000.
It is estimated that the machine will give the forecasted cash flow for the next years as follows: 2021- $30000
2022- $12000
2022- $6000 (Scrap value) The Present Value (discount factor) at 9% is to be considered.
Discount factor @ 9% | For year 1 = 0.917 | For year 2 = 0.840 | For year 3 = 0.770 |
You are required to:
A. Calculate annual depreciation amount, accumulated depreciation, Carrying Amount, and recoverable amount as of 31st Dec 2020 by applying IAS 36.
(2.5X4 = 10 Marks)
B. Calculate Impairment loss and explain how it will be recognized in the Income statement & statement of financial position applying IAS 36. Pass necessary journal entries.
(2X3 = 6 Marks)
C. you are required to demonstrate an understanding of the Objective and scope of IAS 36. Also, Explain with examples, the various reasons/indicators of such impairment.
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