Question: As at June 2012, Apple owns an item of machinery. The machine is measured using the cost model, its carrying amount is $220,000 (original cost
As at June 2012, Apple owns an item of machinery. The machine is measured using the cost model, its carrying amount is $220,000 (original cost ($352,000) and its estimated remaining life is 5 years.
Managers have inspected the machinery and taken into account economic conditions, which indicate possible impairment, and carry out testing for impairment
The information below shows the asset values at various dates.
Date | Fair value less costs to sell | Future cash flows |
30/06/12 | $78,000.00 | $- |
30/06/13 | $75,000.00 | $44,300.00 |
30/06/14 | $59,000.00 | $42,900.00 |
30/06/15 | $43,000.00 | $41,100.00 |
30/06/16 | $25,000.00 | $49,450.00 |
30/06/17 | $3,000.00 | $50,650.00 |
The pre-tax discount rate for calculations of recoverable amount is 10%. Depreciation method is straight line. No impairment for the 2013/2014 year is indicated. Apple Ltd improves the performance of the machinery at the beginning of the 2014/2015 year, at a cost of $50,000. The same discount rate can still be used. The asset value information is adjusted as follows:
Date | Fair value less costs to sell | Future cash flows |
30/06/14 | $80,000.00 | $- |
30/06/15 | $75,000.00 | $69,900.00 |
30/06/16 | $48,000.00 | $66,100.00 |
30/06/17 | $29,000.00 | $59,450.00 |
Prepare general journal entries to account for the machinery from 1 July 2012 to 30 June 2014 in accordance with the requirements of AASB 116 and AASB 136
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AASB 116 requires an entity to recognize an item of property plant and equipment as an asset if and only if it is probable that future economic benefi... View full answer
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