Andrea Company has one division that performs machinery operations on parts that are sold to contractors. A group of machines had an aggregate cost and accumulated depreciation on January 1, 2018 as follows: Machinery 450,000 Accumulated depreciation 12,500 The machines have an average remaining life of 4 years and it has been determined that this group of machines constitutes a cash generating unit. The fair value less cost to sell of this group of machines in an active market is determined to be 240,000. Based on supportable and reasonable assumptions, the financial forecast for this group of machines reveals the following cash inflows and cash outflows for the next four years: Cash inflows Cash outflows 2018 150,000 60,000 2019 160,000 90,000 2020 145,000 75,000 2021 80,000 20,000 It is believed that the a discount rate of 8% is reflective of time value of money. The table of present value shows that the present value of 1 at 8% is as follows: Period Present value of 1 1 0.930 2 0.857 3 0.794 0.735 Required: 1. Determined the value in use 2. Determined the recoverable amount 3. Prepare the entry for 2018 - 2019

Andrea Company has one division that performs machinery operations on parts that are sold to contractors. A group of machines had an aggregate cost and accumulated depreciation on January 1, 2018 as follows: Machinery 450,000 Accumulated depreciation 12,500 The machines have an average remaining life of 4 years and it has been determined that this group of machines constitutes a cash generating unit. The fair value less cost to sell of this group of machines in an active market is determined to be 240,000. Based on supportable and reasonable assumptions, the financial forecast for this group of machines reveals the following cash inflows and cash outflows for the next four years: Cash inflows Cash outflows 2018 150,000 60,000 2019 160,000 90,000 2020 145,000 75,000 2021 80,000 20,000 It is believed that the a discount rate of 8% is reflective of time value of money. The table of present value shows that the present value of 1 at 8% is as follows: Period Present value of 1 1 0.930 2 0.857 3 0.794 0.735 Required: 1. Determined the value in use 2. Determined the recoverable amount 3. Prepare the entry for 2018 - 2019

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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