Munasib Limited (ML) is a manufacturer of Polyester. On December 31, 2016, it decided to classify...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Munasib Limited (ML) is a manufacturer of Polyester. On December 31, 2016, it decided to classify an item of property, plant and equipment (PPE) as being held for sale (assuming all criteria of recognition are met). At that date, the carrying amount was Rs. 105 million, its fair value was Rs. 110 million and estimated costs to sell amounted to Rs. 8 million. Asset was acquired 3 years ago at the cost of Rs. 150 million and had a useful life of 10 years. ML failed to negotiate the price with Zamir Limited and hence was unable to sell the asset, therefore, on December 31, 2017, it decided to reverse the decision to classify asset as held for sale and decided to use it in the business. At December 31, 2017, the asset had a fair value of Rs. 100 million and estimated cost to sell was Rs. 8 million. ML estimates that it will be able to generate Rs. 22 million of annual cash flow from this asset for the remaining useful life. ML uses weighted average cost of capital (WACC) of 8%. Required: In accordance with the requirements of IFRS 5 Non-Current Assets held for Sale and Discontinued Operations, discuss how the asset should be accounted for in ML's financial statements for the year ended December 31, 2016 and 2017. [PVIFA(8%, 6) = 4.623] Munasib Limited (ML) is a manufacturer of Polyester. On December 31, 2016, it decided to classify an item of property, plant and equipment (PPE) as being held for sale (assuming all criteria of recognition are met). At that date, the carrying amount was Rs. 105 million, its fair value was Rs. 110 million and estimated costs to sell amounted to Rs. 8 million. Asset was acquired 3 years ago at the cost of Rs. 150 million and had a useful life of 10 years. ML failed to negotiate the price with Zamir Limited and hence was unable to sell the asset, therefore, on December 31, 2017, it decided to reverse the decision to classify asset as held for sale and decided to use it in the business. At December 31, 2017, the asset had a fair value of Rs. 100 million and estimated cost to sell was Rs. 8 million. ML estimates that it will be able to generate Rs. 22 million of annual cash flow from this asset for the remaining useful life. ML uses weighted average cost of capital (WACC) of 8%. Required: In accordance with the requirements of IFRS 5 Non-Current Assets held for Sale and Discontinued Operations, discuss how the asset should be accounted for in ML's financial statements for the year ended December 31, 2016 and 2017. [PVIFA(8%, 6) = 4.623]
Expert Answer:
Answer rating: 100% (QA)
As per IFRS 5 the asset should be classified as held for sale on December 31 2016 as it met all ... View the full answer
Related Book For
Accounting Principles
ISBN: 978-1118875056
12th edition
Authors: Jerry Weygandt, Paul Kimmel, Donald Kieso
Posted Date:
Students also viewed these accounting questions
-
On March 1, Lincoln sold merchandise on account to Amelia Company for $28,000, terms 1/10, net 45. On March 6, Amelia returns merchandise with a sales price of $1,000. On March 11, Lincoln receives...
-
On January 6, Compton Limited sold merchandise on account to Singh Inc. for $45,200, terms 2/10, n/30. The merchandise originally cost Compton $26,500. On January 15, Singh paid the amount due. Both...
-
On January 2, Handley Ltd. sold merchandise on account to R. James for $51,000, terms n/30. The company uses a perpetual inventory system and the merchandise originally cost $32,200. On February 1,...
-
You are the manager of a large car dealership. At present, you rely on a large pool of dealers to sell your product, but you have noticed recently that consumer opinion appears to be turning away...
-
Cromwell Corporation does business in two states, A and B State A uses an equal-weighted three-factor apportionment formula and has a 5 percent state tax rate. State B uses an apportionment formula...
-
What is the MPS? Use the information in the following table Y C G X $100 $120 $20 $30 $10 $300 $300 $20 $30 -$10 $500 $480 $20 $30 -$30 $700 $660 $20 $30 -$50
-
Test H0: 1 = 0 versus H1: 1 0 at the = 0.05 level. Repeat for 2 and 3. Exercises 1115 refer to the following data set: x1 *2 x3 69.8 7.9 37.3 62.4 32.3 9.3 20.2 40.7 66.9 13.3 30.5 48.7 87.5 27.4...
-
The dollar cost of debt for Coval Consulting, a U.S. research firm, is 7.5%. The firm faces a tax rate of 30% on all income, no matter where it is earned. Managers in the firm need to know its yen...
-
The family of 70 year old Mr. B came to the NP to discuss a recent discovery that Mr. B has Huntington's disease. Mr. B has had tremors for many years, which were thought to be due to prior alcohol...
-
1. The initial data on inventory, purchases and sales of tennis rackets are as follows: April 3 Inventory 21 units @ $17 11 Purchase 12 units @ $17 14 Sale 16 units 21 Purchase 14 units @ $19 25 Sale...
-
Larson Property Management Company is one of the largest property management companies in California, with more than 1,000 employees. The company provides a full array of commercial management and...
-
DowDuPont would be the second largest chemical company in the world, behind BASF of Germany, with more than \($92\) billion in annual revenue. In an unusual display of financial restructuring linked...
-
Predicting Prices of Used Cars (Regression Trees). The file ToyotaCorolla.jmp contains the data on used cars (Toyota Corolla) on sale during late summer of 2004 in The Netherlands. It has 1436...
-
Antibiotics in Infancy and Obesity in Adults "Antibiotics in infancy may cause obesity in adults," claims a recent headline. A study in mice randomly assigned infant mice to either be given...
-
Owners of sport franchises face tough decisions related to capital structure when they decide a new facility is needed. The St. Louis Cardinals were faced with these decisions when they decided to...
-
\ A stock's returns have the following distribution: Demand for the Probability of This Company's Products Demand Occurring Rate of Return If This Demand Occurs Weak 0.1 (46%) Below average 0.1 (15)...
-
How many years will it take a $700 balance to grow into $900 in an account earning 5%?
-
Pfannes Company is preparing its multiple-step income statement, owners equity statement, and classified balance sheet. Using the column headings Account, Financial Statement, and Classification,...
-
Financial information for Messersmith Company is presented below. Additional information: 1. Inventory at the beginning of 2016 was $118,000. 2. Total assets at the beginning of 2016 were $630,000....
-
(a) What are the major sources (inflows) of cash in a statement of cash flows? (b) What are the major uses (outflows) of cash?
-
__________________ and __________________ are lowered to increase the camber of the wings and provide greater lift and control at slow speeds.
-
If the failure of a structure causes a loss of control of the aircraft or leads to a catastrophic structural collapse, the structure is classified as __________________ structure.
-
Wing sweepback is designed to delay or alleviate shock induced separation of airflow and improves aerodynamic performance.
Study smarter with the SolutionInn App