KencanaBayu Resort Bhd is a local resort operating at Redang Island. Besides providing accommodation and recreational...

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KencanaBayu Resort Bhd is a local resort operating at Redang Island. Besides providing accommodation and recreational activities the resort provides water transportation facilities such as ferries and speedboats. Unfortunately, the monsoon season happened unexpectedly it started earlier but lasted longer than usual and it hit demand for the business tremendously. Some boats also need serious repairs and a few parts needed to be replaced due to the damage caused by the monsoon wave. Due to this adverse event, the resort decided to provide for impairment loss for the year ended 30 June 2022 for the boats. KencanaBayu Resort Bhd purchased the boat on 1 July 2021 for RM2,000,000. The boats has an estimated useful life of 5 years with no salvage value and depreciated using straight line method. The selling price of the boats as at the date was RM985,000 and the cost to sell the boats were RM25,000. The resort projected cash inflows from the boats were as follows: Year ended Projected cash inflows (RM) The monsoon ended on March 2023 and resort started repair and maintenance work on that date. At 30 June 2023 the maintenance was completed. The carrying amount of major parts of the boats that has been replaced was RM600,000 without taking into account the impairment loss and RM500,000 after taking into account of impairment loss calculated previously. The new parts which cost of RM800,000 has been replaced. The resort believes it will improve visitors comfort and increase the performance of the boats. 30/6/2023 30/6/2024 30/6/2025 500,000 410,000 370,000 The resort has made an aggressive marketing strategy to attract visitors. The strategy was very successful and demand for vacation at KencanaBayu Resort Bhd positively increased. The recoverable amount of the boats as at 30 June 2023 was estimated to be RM1,800,000. The company's incremental borrowing rate was 14%. The present value table for single. sums, where i interest and n= years is given below: g Years (n) Interest () 4 0.877 2 0.769 3 0.675 4 0.592 5 0.519 Required: a. Calculate the impairment loss (if any) for the boats for the year ended 30 June 2022. (7 marks) b. Decide on the amount of impairment loss reversal of impairment loss for the year ended 30 June 2023. (10 marks) c. Advise the company on how the boats should be presented in its Statement of Financial Position for the year ended 30 June 2022 and 2023. KencanaBayu Resort Bhd is a local resort operating at Redang Island. Besides providing accommodation and recreational activities the resort provides water transportation facilities such as ferries and speedboats. Unfortunately, the monsoon season happened unexpectedly it started earlier but lasted longer than usual and it hit demand for the business tremendously. Some boats also need serious repairs and a few parts needed to be replaced due to the damage caused by the monsoon wave. Due to this adverse event, the resort decided to provide for impairment loss for the year ended 30 June 2022 for the boats. KencanaBayu Resort Bhd purchased the boat on 1 July 2021 for RM2,000,000. The boats has an estimated useful life of 5 years with no salvage value and depreciated using straight line method. The selling price of the boats as at the date was RM985,000 and the cost to sell the boats were RM25,000. The resort projected cash inflows from the boats were as follows: Year ended Projected cash inflows (RM) The monsoon ended on March 2023 and resort started repair and maintenance work on that date. At 30 June 2023 the maintenance was completed. The carrying amount of major parts of the boats that has been replaced was RM600,000 without taking into account the impairment loss and RM500,000 after taking into account of impairment loss calculated previously. The new parts which cost of RM800,000 has been replaced. The resort believes it will improve visitors comfort and increase the performance of the boats. 30/6/2023 30/6/2024 30/6/2025 500,000 410,000 370,000 The resort has made an aggressive marketing strategy to attract visitors. The strategy was very successful and demand for vacation at KencanaBayu Resort Bhd positively increased. The recoverable amount of the boats as at 30 June 2023 was estimated to be RM1,800,000. The company's incremental borrowing rate was 14%. The present value table for single. sums, where i interest and n= years is given below: g Years (n) Interest () 4 0.877 2 0.769 3 0.675 4 0.592 5 0.519 Required: a. Calculate the impairment loss (if any) for the boats for the year ended 30 June 2022. (7 marks) b. Decide on the amount of impairment loss reversal of impairment loss for the year ended 30 June 2023. (10 marks) c. Advise the company on how the boats should be presented in its Statement of Financial Position for the year ended 30 June 2022 and 2023.

Answer rating: 100% (QA)

a Calculation of impairment loss for year ended 30 June 2022 Carrying amount before assessment cost ... View the full answer