Company X uses a machine in the manufacturing of components. In December 2009, a competitor launched its
Question:
Company X uses a machine in the manufacturing of components. In December 2009, a competitor launched its own range of components. These components are being offered at a much lower price. The Company forecasts a 40-50% fall in sales over the next three years. Following detailed assessments Company X has provided you with the following information: ▪The carrying value of the machine at the date of calculation is 35,000 ▪The asset is currently depreciated on the straight line basis at a rate of 5% and has a remaining useful life of five years. ▪The value of the asset on the second hand market is 12,000. Costs of disposing the asset are expected to amount to 3,000. ▪Discounted net cash Inflows from the asset over the asset’s remaining useful life (including disposal proceeds) has been assessed at 9,700. ▪The current residual value of the asset has been estimated at 1,200 What is the amount of the impairment loss?
Management Accounting
ISBN: 978-0132570848
6th Canadian edition
Authors: Charles T. Horngren, Gary L. Sundem, William O. Stratton, Phillip Beaulieu