Required: With respect to MFRS 136, Impairments of Assets, calculate the impairment loss for the machine for the year ended 31 December 2023. Show relevant workings.
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Coco Sdn Bhd has a year end of 31 December and operates a factory which makes
ceramic tiles. It purchased a machine on 1 July 2020 for RM80,000 which had a
useful life of ten years and is depreciated on the straight-line basis, time apportioned
in the years of acquisition and disposal. The machine was revalued to RM81,000 on
1 July 2021. There was no change to its useful life at that date. A fire at the factory
on 1 October 2023 damaged the machine leaving it with a lower operating capacity.
The accountant considers that Coco Sdn Bhd will need to recognise an impairment
loss in relation to this damage.
The accountant has ascertained the following information at 1 October 2023:
i. An equivalent new machine would cost RM90,000.
ii. The machine could be sold in its current condition for a gross amount
of RM45,000 with a dismantling cost of RM2,000.
iii. In its current condition, the machine could be used for three more years
which gives it value in use of RM38,685.
Required:
With respect to MFRS 136, Impairments of Assets, calculate the impairment
loss for the machine for the year ended 31 December 2023. Show relevant
workings.
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- Quorum Ltd owns and operates an item of machinery. At 1 October 2019 the machinery had acarrying value of R700 000. The original cost was R1 400 000 and accumulated depreciation wasR700 000. The machinery is depreciated at a rate of 12.5% per annum on a straight line basis.On 1 February 2020 the machinery sustained some damage after an incident in the factory. Anassessor has inspected the machinery and determined that the estimated value in use of themachinery is now R500 000. The current disposal value after costs of the machinery is R350 000and trade‐in value (only in the event of an upgrade) is R550 000. The company still considers themachinery to be functional and is not considering an upgrade at the moment.Required:Q.1.1 What is the carrying value of the machinery immediately before impairment?Q.1.2 Calculate the recoverable amount of the plant on 1 February 2020. Q.1.3 Calculate the amount of the impairment loss that would be recognised, if any, on1 February 2020.Q.1.4 Calculate…Quorum Ltd owns and operates an item of machinery. At 1 October 2019 the machinery had acarrying value of R700 000. The original cost was R1 400 000 and accumulated depreciation wasR700 000. The machinery is depreciated at a rate of 12.5% per annum on a straight line basis. On 1 February 2020 the machinery sustained some damage after an incident in the factory. Anassessor has inspected the machinery and determined that the estimated value in use of themachinery is now R500 000. The current disposal value after costs of the machinery is R350 000and trade‐in value (only in the event of an upgrade) is R550 000. The company still considers themachinery to be functional and is not considering an upgrade at the moment Calculate the recoverable amount of the plant on 1 February 2020.Quorum Ltd owns and operates an item of machinery. At 1 October 2019 the machinery had acarrying value of R700 000. The original cost was R1 400 000 and accumulated depreciation wasR700 000. The machinery is depreciated at a rate of 12.5% per annum on a straight line basis.On 1 February 2020 the machinery sustained some damage after an incident in the factory. Anassessor has inspected the machinery and determined that the estimated value in use of themachinery is now R500 000. The current disposal value after costs of the machinery is R350 000and trade‐in value (only in the event of an upgrade) is R550 000. The company still considers themachinery to be functional and is not considering an upgrade at the moment. Q.1.4 Calculate the carrying value of the plant at the year‐end dated 30 September 2020.HINT: Convert the remaining useful life to months.Q.1.6 Explain in your own words the key objective of IAS36 – Impairment of assets.
- Rahara Ltd purchased a piece of equipment for £600,000 on the 1st January 2021. The equipment is expected to have an economic life of 5 years and will have no residual value. Depreciation is calculated on a straight-line basis over the life of the asset. The company received a government of £200,000 towards the purchase of the equipment. The financial year end of the company is December 31st each year. Required: Show the relevant extracts from the financial statements for the years ended 31/12/21 & 31/12/22 under each of the two allowable methods of presentation.On 1 October 2019, company X (with a year-end as at 30th Sept) acquired an item of machinery for£10,720. During the year, the machinery had got damaged and was underperforming, although it was stillbeing used. By 30 September 2020, following the damage, the item of machinery had an estimatedremaining useful life of two years, a value in use of £6,300 and a fair value of £6,400. The costs to sell theitem of machinery amounted to £500. Company X depreciates machinery on a reducing balance basis ata rate of 20% per annum.Compute the impairment loss in relation to the aforementioned item of machinery to be shown in companyX’s income statement for the year ending 30th September 2020.Wetherby Plc purchased a machine on 1 July 2022 for £500,000. It is being depreciated on a straight-line basis over its useful life of ten years. Residual value is estimated at £20,000. On 1 January 2023 following change in legislation Wetherby Co fitted a safety guard to the machine. The safety guard cost £25,000 and has a useful life of five years with no residual value. Required: What amount will be charged to profit or loss for the year ended 31 March 2023 in respect of depreciation on this machine? ( Calculate your answer to the nearest whole £)
- On 31st August 2018, Musk Traders purchased a machine on credit for a cost price of R402 500(including VAt at 15 percent) Machinery is depreciated over six years according to the straight line basis and there is no residual value on this machine as it is highly specialised. MUSK TRADERS HAS A 30 JUNE YEAR-END CALCULATE THE DEPRECIATION AND ACCUMULATED DEPRECIATION FOR 2019 AND 2020.On 1 January 2019, Metsi Limited purchased a plant for R1 500 000 cash. The plant was immediately available for use. It was determined that the plant needs to be dismantled at an estimated cost of R250 000 at the end of its useful life of five years. Assume all criteria for the recognition of the dismantling provision has been met and that it is not used to produce inventories. A fair discount rate of 10% per annum (pre-tax) is applicable. The plant has no residual value and Metsi Limited uses the straight-line method to calculate depreciation. Calculate the depreciation expense recognised in the current financial year ending 31 December 2019. a. R350 000 b. R300 000 c. R331 046 d. R335 318ABC Limited is a manufacturing company with a 30 June year-end. On 1 July 2018, ABC Limited purchased plant at the cost of R1 200 000. Depreciation is calculated over 15 years by using the straight-line method with the plant having an insignificant residual value. ABC Limited's policy is to revalue the plant annually on 30 June and carry the plant at net replacement cost. They further realise revaluation surpluses while the relevant assets are used. The plant had the following gross replacement cost: • 30 June 2019 – R1 230 000 • 30 June 2020 – R1 275 000 Revaluations are done by an independent appraiser who determines the replacement cost with reference to observable prices in an active market. On revaluation, accumulated depreciation is set off against the gross carrying amounts. The residual value and useful life of the plant were reassessed on 30 June 2020, and no changes were noted. The South African Revenue Service grants a wear and tear allowance of 10% on the plant.…
- Bold Ltd purchased machinery on 1 January 2021 at a cast of R1 200 000. A major inspection has to be carried out on the machinery every three years. The last inspection performed on the machine was on 31 December 2020 by the selle and the inspection costs were included in the purchase price. On the acquisition date, the present value of future expected inspection costs to be incurred was estimated at an amount of R240 000. On the acquisition date the estimated useful life of 10 years was allocated to the machine. The inspection component is part of the machine and not a separate asset The carrying amount of the machinery (including the inspection component) for the year ended 31 December 2021 1. R1 124 000 O2 R1 000 000 O3 R1 056 000 4. R1 024 000Co D acquires a plant for £600.000 on 1 Jan 2016. This machinery is depreciated on a straight-line basis over its useful economic life which is estimated to be 15 years. On 1 Jan 2021, the company revalues the machinery to be £480,000 using revaluation model. The plant was sold on 1 Jan 2022 for £470.000. Co D's year end is 31 Dec. Required: A. Clearly show cost, accumulated depreciation and carrying value of the plant as of 1 Jan 2011 before revaluation. Show accounting entries on 1 Jan 2021 when plant is revalued. B-Show accounting entries on disposal of the plant on 1 Jan 2022.QRS ltd purchased a machine on 1 July 2014 for GHS500,000. It is being depreciated on a straight line basis over its expected life of ten years. Residual value is estimated at GHS20,000. On 1 January 2015, following a change in legislation, QRS ltd fitted a safety guard to the machine. The safety guard cost GHS25,000 and has a useful life of five years with no residual value. What is the depreciation charge for this machine in the year ended 31 March 2015?