Question 3 (30 marks) a Orange Ltd was acquired by Apple Ltd on 1 January 2018. Orange Ltd faced difficult trading activities in the past few years and business performance did not recover after the acquisition. Its financial results, together with the continuing economic downturn, prompted the management of Apple Ltd to review the future expected performance of the business, as well as the value of some of the assets in Orange Ltd's statement of financial position. The following are the net assets of Orange Ltd's three business divisions (CGU) on 31 December 2018: Its, togee did not lvities in Cash Property, plant and equipment Intangible Goodwill Division A Division B Division C $'000 $'000 S'000 1,500 1,800 500 32,000 30,000 20,000 800 0 0 1,240 34,300 33,040 20,500 Orange Ltd also had corporate assets of $9,000,000 on 31 December 2018. These corporate assets are shared by Division A, B and C in the ratio of 2:2:1. The intangible asset of the Division A relates to the cost of a trademark acquired from a competitor several years ago. It is estimated that the trademark had a net selling price of $760,000 on 31 December 2018 All divisions suffered from under-investment in recent years. Their net fair values were estimated to be: Division A Division B Division C $27,000,000 $30,000,000 $30,000,000 The expected cash flows (present value) to be generated from the divisions for the next four years are: Division A Division B Division C $28,000,000 $32,000,000 $25,000,000 The significant increases in cash flow would arise from the impact of the new management team from Apple Ltd. There would be no significant cash flows from the assets employed in each division after Year 4. Required: i Calculate the impairment loss for Division A, B and C for the year ended 31 December 2018. Show your workings. (10 marks) ii Determine the carrying amount of the assets in Orange Ltd as at 31 December 2018. Show your workings. b Apple Ltd owns a specialized machine. The machine cost $800,000 and is being depreciated over a period of 10 years. At 1 October 2018, the machine is carried in the statement of financial position at $560,000. On 31 March 2019 Apple Ltd's management decided to sell the machine and immediately instructed a selling agency to market the machine. The current market value of the machine is $540,000. Apple Ltd needs to pay a 5 per cent commission to the selling agency. Apple Ltd's financial year ends on 31 March. It prepares interim reports on 30 September each year. Required: i Discuss the accounting treatment for the machine on 31 March 2019 with reference to a prevailing accounting standard in Hong Kong. (5 marks) ii At what value should the machine be included in Apple Ltd's statement of financial position at 31 March 2019 and 30 September 2019, assuming that it has not yet been sold and that its fair value has remained unchanged since 31 March 2019