You are currently on work experience at CMAS Co-operative Ltd and the General Manager has asked your supervisor to prepare an explanation for some concerns raised by the Board of Directors. Your supervisor has to leave the office as a result of an emergency, and he has asked you to prepare the information for his review to be submitted to the General Manager.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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You are currently on work experience at CMAS Co-operative Ltd and the General Manager has asked your supervisor to prepare an explanation for some concerns raised by the Board of Directors. Your supervisor has to leave the office as a result of an emergency, and he has asked you to prepare the information for his review to be submitted to the General Manager.

 

A. Briefly explain the difference in accounting treatment, between an owner occupied property and an investment property

B. You are also helping to prepare the organisation’s year end financial statement and have been asked to carry out an impairment review of non-current assets held. You have obtained details of two photocopiers in the print room as follows:

 

Machine 1 – is six years old and is a relatively slow copier based on old technology. The cost of this machine was $80,000 and depreciation to date is $48,000, with NBV of $32,000. Since the arrival of the other copier this machine has been relegated to “standby” use.  The fair value of the machine is $10,000 if sold on the second-hand market and no selling cost will be incurred and the value in use is $20,000.

 

Machine 2 – is only a few months old. It is a digital copier incorporating the latest technology, very fast and versatile and has the capacity to meet the needs of the entire organisation. It cost $150,000 and depreciation at the end of the accounting period will be $15,000, NBV of $135,000.  The fair value of the machine is $100,000 if sold on the second-hand market and no selling cost. The value in use is $550,000.                                                       

 

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