At 1 January, Sunflower Co paid $2,800 for WMC, a company whose main activity consists of refuse collection. WMC owns four refuse collection vehicles and a local government licence, without which it could not operate.
At 1 January, the fair value of each lorry and of the licence is $500. WMC has no insurance cover for its vehicles.
At 1 February, one lorry crashed and is a write-off. Because of its reduced capacity, the value in use of the business is estimated at $2,220.
Required:
Allocate the impairment loss to the assets of Sunflower Co.
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Can you please help me to solve this question
2y ago#1Hi,
I'm not here to just outright answer a question for you. You need to demonstrate that you have done it yourself first so that you can then be more specific about what you don't understand. I can then help you with this.
The key here to find the impairment loss is to compare the carrying value to the recoverable amount and I'll leave the rest to you.
Look forward to hearing back from you to see if you get it right or if I can help.
Thanks
Activity 2 Impairment Loss, Part 1
At 1 January, Sunflower Co paid $2,800 for WMC, a company whose main activity is refuse collection. WMC owns four refuse collection vehicles and a local government licence, without which it could not operate.
At 1 January, the fair value of each lorry and the licence is $500. WMC has no insurance cover for its vehicles.
At 1 February, one lorry crashed and is a write-off. Because of its reduced capacity, the recoverable amount of the business, which is a CGU, is estimated at $2,220.
Required:
Allocate the impairment loss to the assets of Sunflower Co.
You should ignore depreciation for the period 1 January to 1 February.
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