On 2 January 2011 Mekar Engineering Berhad had purchased high-tech equipment for $1,000,000 that was used to produce Zyi. Other costs incurred in relating to the acquisition of this equipment are transportation cost of $120,000; import duty $50,000; and installation costs of $30,000. The annual repairs and maintenance cost is $50,000. Merka Engineering Berhad had spent $350,000 to further improved the performance of the equipment in the early 2014. The improvement costs has successfully increased the production level by 20% compared to the previous production level. Company policy required that the equipment been depreciated using the straight-line method, an estimated useful life of 20 years and the estimated residual value of 10% of its acquisition cost.

The company operations have experienced significant losses for the past two years as the demand for the product Zyi has declined significantly. in the 2018 financial yeah which ended on 31 December, the remaining useful life of the equipment is estimated to be only 7 years. The annual cash inflow that can be generated from the utilization of the equipment is $230,000 and the expected total cost to maintain the equipment will be $80,000 per year. The fair value of the equipment as estimated by professional valuer is $800,000 and it is expected that Mekar engineering Berhad will have to spend $40,000 to sell the equipment. A detail analysis on the current economic scenario was made and the CFO of Mekar Eng Berhad estimated that the market prevailing interest rate for the company would be 12%.

1- Explain whether Merka Eng Berhad need to conduct an impairment test as outlined in MFRS136 impairment of assets for the above equipment?

2-Explain if Merka Eng Berhad should recognized an impairment loss for the above equipment in accordance with the equipment of MFRS136 impairment of assets.?

3-Determine the amount of the loss if any and prepare the required journal entry to record the loss?

4-Determine the carrying amount of the equipment after the recognition of the impairment loss. Compute the depreciation expenses to be provided for the equipment for the financial year of 2018 based on the new carrying amount and prepare the required journal entry to record the depreciation expenses?

5-Prepare a partial statement of Financial Position as at 31 December 2018 for Merka Eng Berhad to disclose the equipment?