Question 1 (6 marks)

Jaspreet Corp., a mining company, owns a significant mineral deposit in a northern

territory. Jaspreet prepares financial statements in accordance with IFRS. Included in

the asset is a road system that was constructed to give company personnel access to

the mineral deposit for maintenance and mining activity. The road system cannot be sold

separately and does not generate cashflows separately from other assets. The carrying

amounts of two cash-generating units of the mine at June 30, 2020, are as follows:

Machinery $4,000,000

Mine in the development phase $9,500,000

The machinery's value in use has been assessed at $4,500,000 while the fair value less

costs to sell is $3,800,000. With respect to the mine, the value in use is $9,000,000 while

fair value less costs to sell is $9,350,000.

Required:

(a) (2 marks) How should the road system's recoverable amount be determined?

(b) (4 marks) Determine if the machinery and the mine are impaired and prepare

the journal entries, if any, to record the impairment at June 30, 2020.