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Hello Sir,
The carrying amount of the patent at the date of the impairment (31 March 2016) is $3·75 million (7,500 – (3,000+ 750)), the higher of its fair value (3,400) and its value in use (3,250) is $3·4 million, thus the patent is impaired by $350,000 (3,750 – 3,400).
This is the answer regarding the calculation of patent, but I do not understand why 750 is added to 3000 of accumulated depreciation.Shouldn’t the depreciation for the year be calculated as:
Cost 7500
-Accumulated depreciation 3000
= 4500
-depreciation for the year
4500/10 yr 450
= 4050 (carrying amt for the year)
Less recoverable amt 3400
Impairment = 650Please help!
Surely, as at date of impairment, the amount to be amortised for the year before impairment is the cost figure of $7,500
Following the impairment exercise the patent will be amortised over its remaining life and amortisation will be based on the newly impaired figure
Is that better?
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