Hajia Timber Ltd (GTL) produces and exports lumber and planks. It owns a plant which has value of GHC 1,800,000 as at 1 January 2010. The government of Ghana,passes a legislation that restricts the exportation of lumber. Consequently GTL has to reduce production by 40%. Cash flow forecast for the next five years included in the budget submitted for management approval in January 2010 shows the following: Year Cash flows (GHC) 2010 552,000 2011 506,000 2012 376,000 2013 250,000 2014 560,000 The cashflow forecast for 2014 includes expected proceeds from disposal of the plant. The cash flow projections also ignore the effects general upwards movement in prices. It is estimated that if the plant is sold in January 2010, it would realize the net proceeds of GHC 1,320,000. The costs of capital for GBL is 15% (ignoring inflationary effect) Required Calculate the recoverable amount of the plant and impairment loss (if any).
Hajia Timber Ltd (GTL) produces and exports lumber and planks. It owns a plant which
has value of GHC 1,800,000 as at 1 January 2010. The government of Ghana,passes a
legislation that restricts the exportation of lumber. Consequently GTL has to reduce
production by 40%. Cash flow
submitted for management approval in January 2010 shows the following:
Year Cash flows (GHC)
2010 552,000
2011 506,000
2012 376,000
2013 250,000
2014 560,000
The cashflow forecast for 2014 includes expected proceeds from disposal of the plant. The
cash flow projections also ignore the effects general upwards movement in prices.
It is estimated that if the plant is sold in January 2010, it would realize the net proceeds of
GHC 1,320,000. The costs of capital for GBL is 15% (ignoring inflationary effect)
Required
Calculate the recoverable amount of the plant and impairment loss (if any).
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