Question 3: Reversal of impairment loss The draft accounts for Friends Ltd for the year ended 31 December 2015 included the following: Machine at cost Accumulated depreciation Net book value 120,000 75,000 45,000 The machine is depreciated at an annual rate of 12.5% using the straight-line method. Due to adverse changes in technology, the company has conducted an impairment test at the end of 2015 and the following information has become available: Expected selling price of the machine Disposal cost of the machine Expected discounts cash flows over the next three years Required a) Calculate the impairment loss at 31 December 2015. 44,000 2,000 38,000 b) Redraft the plant and equipment note to reflect the impairment on 31 December 2015. c) Draft the plant and equipment note for 2016. d) In December 2016 there was an evidence of an increase in the market value of the machine and the machine now has a recoverable amount of 31,000. You are required to redraft 2016's plant and equipment note to reflect this change in December 2016 and determine the maximum amount to be reversed from the impairment loss.