Sembawang Manufacturing Ltd has a machine with a carrying amount of $249,000. Sembawang has identified that...

 

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Sembawang Manufacturing Ltd has a machine with a carrying amount of $249,000. Sembawang has identified that an economic slump may be an indicator of the impairment of the machine and has therefore initiated an impairment review. The fair value of the machine is $263,000 and the following costs of disposal have been identified: • Legal costs . Costs of removal $10,000 $15,000 • Redundancy payment to machine operator $25,000 Future cash flow forecasts derived from the most recent budgets approved by management are: Year 1 $75,000 Year 2 $69,000 Year 3 $59,000 Year 4 $57,000 Year 5 $54,000 An appropriate asset-specific pre-tax discount rate of 10% has been estimated by Sembawang Manufacturing. Required: Has an impairment occurred and if so what is the amount of the impairment loss? Sembawang Manufacturing Ltd has a machine with a carrying amount of $249,000. Sembawang has identified that an economic slump may be an indicator of the impairment of the machine and has therefore initiated an impairment review. The fair value of the machine is $263,000 and the following costs of disposal have been identified: • Legal costs . Costs of removal $10,000 $15,000 • Redundancy payment to machine operator $25,000 Future cash flow forecasts derived from the most recent budgets approved by management are: Year 1 $75,000 Year 2 $69,000 Year 3 $59,000 Year 4 $57,000 Year 5 $54,000 An appropriate asset-specific pre-tax discount rate of 10% has been estimated by Sembawang Manufacturing. Required: Has an impairment occurred and if so what is the amount of the impairment loss?

Answer rating: 100% (QA)

Step 11 Impairment loss is recognized when carrying value of an ... View the full answer