d a coffee roasting machine on 1 January 2019 at a cost of R3 300 000. The purpose of the roasting machine is to roast coffee beans produced by the company’s farms. At the date of purchase the machine was expected to have a total useful life of twelve years and a nil residual value. A severe drought in 2020 has resulted in a reduced crop yield for that year. As a result of this, the roasting machine’s use has been reduced drastically. On 31 December 2020 management revised the remaining useful life of the machine to six years. Fundi Ltd calculated the following net cash inflows from the machine over the next five years. A discount rate of 8% is applicable, and the present value factors are as given below. Year R Discount factor 2021 720 000 0.926 2022 500 000 0.857 2023 410 000 0.794 2024 350 000 0.735 2025 200 000 0.681 On the 31 December 2020 the market value of the machine was R2 400 000 with estimated costs of disposal of R17 750. Required: Q.5.1 Calculate the value of the impairment loss, if any, for the year ended 31 December 2020.

d a coffee roasting machine on 1 January 2019 at a cost of R3 300 000. The purpose of the roasting machine is to roast coffee beans produced by the company’s farms. At the date of purchase the machine was expected to have a total useful life of twelve years and a nil residual value. A severe drought in 2020 has resulted in a reduced crop yield for that year. As a result of this, the roasting machine’s use has been reduced drastically. On 31 December 2020 management revised the remaining useful life of the machine to six years. Fundi Ltd calculated the following net cash inflows from the machine over the next five years. A discount rate of 8% is applicable, and the present value factors are as given below. Year R Discount factor 2021 720 000 0.926 2022 500 000 0.857 2023 410 000 0.794 2024 350 000 0.735 2025 200 000 0.681 On the 31 December 2020 the market value of the machine was R2 400 000 with estimated costs of disposal of R17 750. Required: Q.5.1 Calculate the value of the impairment loss, if any, for the year ended 31 December 2020.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 14P

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