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The following information relates to an item of plant.
Its carrying amount in the statement of the financial position is $3 million. The company has received an offer of $2.7 million from a company in Japan interested in buying the plant.
The present value of the estimated cash flows from continued use of the plant is $2.6 million.
The estimated cost of shipping the plant to Japan is $50,000.Required:
Calculate the amount of the impairment loss that should be recognized on the plant.
Impairment is the difference between Carrying value”$3 million” and 1) or 2) “higher one”
1)The FV less cost to sell is $2.65 million (2.7-0.05).
2)The PV of cash flows is $2.6 million.Therefore the higher is 1)
so impairment is $3 million – $2.65 million = $0.35 millionDr impairment $0.35 million
Cr Plant $0.35 million
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