Impairment of assets

Hi Chris, following is the question from Kaplan Study Text Test your understanding 4. Impairment of assets Q. The following trial balance relates to Hume at 30 June 20X7: $ $ Revenue 390,000 Cost of sales 210,600 Distribution costs 6,800 Administration expenses 12,700 Loan interest paid 3,600 Property – cost 150,000 Property – depreciation at 1 July 20X6 38,400 Plant and equipment – cost 176,200 Plant and equipment – depreciation at 1 July 20X6 48,600 Trade receivables 31,600 Inventory – 30 June 20X7 18,100 Bank 1,950 Trade payables 25,400 Ordinary shares $1 50,000 Share premium 9,000 12 % Loan note (issued 1 July 20X6) 40,000 Taxation 1,300 Retained earnings at 1 July 20X6 11,450 –––––– ––––––– 612,850 612,850 ––––––– ––––––– The following notes are relevant: 1 Property includes land at a cost of $30,000. The building is being depreciated on a straight-line basis over its estimated useful life of 25 years. 2 Plant and equipment is being depreciated on the reducing balance basis at a rate of 20% per annum. 3 The balance on plant and equipment included a piece of specialist machinery that cost $70,000 on 1 July 20X5. On 30 June 20X7, a fork-lift truck reversed into the machinery causing severe damage. Hume has identified two possible options: (i) Sell the machine A potential buyer has been located, who has indicated that she would pay 80% of the carrying amount on 30 June 20X7. However, she has insisted that the machine is repaired before she buys it. The repair work will be done by Hume’s employees and will take about 120 hours of skilled labor, the associated cost with this labor is $2,160. In addition, Hume will have to deliver the machine to the buyer at a cost of $2,100 and there will be a single premium insurance cost of $580 for the journey. (ii) Repair the machine and continue to use it The financial controller has estimated that the present value of cash flows generated from future use (including the repair cost) amount to $31,800. 4 All depreciation is charged to the cost of sales. 5 The directors have estimated the provision for income tax for the year to 30 June 20X7 at $6,500. Required: Prepare the statement of profit or loss for Hume for the year to 30 June 20X7 and a statement of financial position at that date. This is a slightly difficult question and the answer given in the book is also not easy to understand. Can you please provide a youtube video explaining this question? that would be so kind of you.