On 1 January 2017 Rom limited purchased a Machine for $150,000 and the estimated useful life...
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On 1 January 2017 Rom limited purchased a Machine for $150,000 and the estimated useful life of the Machine is 6 years having no residual value. Machine depreciated based on Straight-line method. After 4 years of use, on 31 December 2020, the company decided to make an impairment test on the above machinery. On that day, the machinery's fair market value was $46,000 after spending a selling cost of $5,000. It is estimated that the machine will give the forecasted cash flow for the next years as follows: 2021- $30000 2022- $12000 2022- $6000 (Scrap value) The Present Value (discount factor) at 9% is to be considered. Discount factor @ 9% For year 1 = 0.917 For year 2 = 0.840 For year 3 = 0.770 You are required to: A. Calculate annual depreciation amount, accumulated depreciation, Carrying Amount, and recoverable amount as of 31" Dec 2020 by applying IAS 36. (2.5X4 = 10 Marks) B. Calculate Impairment loss and explain how it will be recognized in the Income statement & statement of financial position applying IAS 36. Pass necessary journal entries. (2X3 = 6 Marks) C. you are required to demonstrate an understanding of the Objective and scope of IAS 36. Also, Explain with examples, the various reasons'indicators of such impairment. (9 Marks) (Total 25 Marks) On 1 January 2017 Rom limited purchased a Machine for $150,000 and the estimated useful life of the Machine is 6 years having no residual value. Machine depreciated based on Straight-line method. After 4 years of use, on 31 December 2020, the company decided to make an impairment test on the above machinery. On that day, the machinery's fair market value was $46,000 after spending a selling cost of $5,000. It is estimated that the machine will give the forecasted cash flow for the next years as follows: 2021- $30000 2022- $12000 2022- $6000 (Scrap value) The Present Value (discount factor) at 9% is to be considered. Discount factor @ 9% For year 1 = 0.917 For year 2 = 0.840 For year 3 = 0.770 You are required to: A. Calculate annual depreciation amount, accumulated depreciation, Carrying Amount, and recoverable amount as of 31" Dec 2020 by applying IAS 36. (2.5X4 = 10 Marks) B. Calculate Impairment loss and explain how it will be recognized in the Income statement & statement of financial position applying IAS 36. Pass necessary journal entries. (2X3 = 6 Marks) C. you are required to demonstrate an understanding of the Objective and scope of IAS 36. Also, Explain with examples, the various reasons'indicators of such impairment. (9 Marks) (Total 25 Marks)
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A Annual depreciation amount Cost of machiery 150000 Useful life 6 Years Residual value Nill Depreciation as per SLM Cost Residual value Useful life 1... View the full answer
Related Book For
Intermediate Accounting Reporting and Analysis
ISBN: 978-1285453828
2nd edition
Authors: James M. Wahlen, Jefferson P. Jones, Donald Pagach
Posted Date:
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