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q1 What is an impairment test? Why is an impairment test considered necessary? q2 At 30 June 2020, an entity holds a block of land

q1 What is an impairment test? Why is an impairment test considered necessary?

q2 At 30 June 2020, an entity holds a block of land from which it generates revenue by leasing it to agricultural enterprises. The land has a carrying amount of $2.5 million. An independent market appraisal has valued the land at $2.36 million but costs to dispose of the land are estimated at $100 000. The value in use of land is determined to be $2.33 million. Required 1. Determine the recoverable amount of the land. 2. Prepare the appropriate journal entry to record any impairment loss that should be recognised.

q3 What are the steps involved in reversing an impairment loss?

q4 image text in transcribedimage text in transcribedimage text in transcribed

Arrow Ltd acquired a machine for $250,000 on 1 July 2019. It depreciated the asset at 10% p.a. on a straight-line basis. On 30 June 2021, Arrow Ltd conducted an impairment test on the asset. It determined that the asset could be sold to other entities for $154,000 with costs of disposal of $2000. Management expect to use the machine for the next four years with expected cash flows from use of the machine beina: 2021 2022 2023 2024 $80 000 60 000 50 000 40 000 The rate of return expected by the market on this machine is 8%. Required Assess whether the machine is impaired. If necessary, provide the appropriate journal entry to recognise any impairment loss. Bow Ltd reported the following assets in its statement of financial position at 30 June 2019. Plant Accumulated depreciation Land Patent Office equipment Accumulated depreciation Inventories Cash and cash equivalents $ 800 000 (240 000) 300 000 240 000 620 000 (340 000) 220 000 180 000 $1 780 000 The recoverable amount of the entity was calculated to be $1 660 000. The fair value less costs of disposal of the land was $280 913

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