MTN Ghana Limited purchased a photocopier machine at ¢60,000 in January 2020. The machine has an estimated
Question:
MTN Ghana Limited purchased a photocopier machine at ¢60,000 in January 2020. The machine has an estimated useful life of 5 years after which the company expects to sell it for ¢10,000. Find the carrying amount of the machine at the end of December 2023 using the straight-line method of depreciation.
MTN Ghana Limited purchased a photocopier machine at ¢50,000 in January 2020. The machine has an estimated useful life of 4 years after which the company expects to sell it for ¢10,000. Find the carrying amount of the machine at the end of December 2022 using some of the year's digit methods of depreciation.
Explain how an accountant should test and allocate impairment loss in an income-generating unit.
Prams ltd has a product line producing processed cocoa beans for export. The carrying amount of the net assets employed as of 31st December 2012 was GH¢672,000. There is an indication that the export market would be adversely affected in 2015 by competition from producers of synthetic cocoa. The finance director estimates the net realizable value of the net assets as of 31st December 2012 to be only GH¢450,000. The Board of Directors has approved a budget for the years ended 31st December 2013, 2014, and 2015.
The assumptions underlying the budget are:
Unit costs and revenue GH¢
Selling price 50.00
Buy in cost (20.00)
Production costs:
Material, labor, and overheads (3.75)
Head office overhead apportioned (1.25)
Cash inflow per unit 25.00
2012 2013 2014 2015
Estimated sales volume 8,000 11,000 4,000
The rate obtained elsewhere for companies in the same industry with similar size and risk profile (equivalent to discount factor) is 9% per annum.
Required: Calculate the impairment loss, if any, for 2012 and explain how it should be treated.
Intermediate accounting
ISBN: 978-0077647094
7th edition
Authors: J. David Spiceland, James Sepe, Mark Nelson