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QUESTION 1
Ruth Ltd has an item of plant, which has undergone an impairment review at 31 December 2019.
At the review, the following estimates were produced:
Fair value of plant $1 400 000
Cost to sell 2% of selling price
Revenue and associated costs per annum for the remaining useful life: (assume all cash flows occur at the end of the year).
Year Revenue ($) Costs ($)
2020 960 000 240 000
2021 880 000 220 000
2022 700 000 290 000
The plant has an estimated residual value of $50 000
A discount rate of 10% is applicable to investments equivalent in risk to this plant.
Required
Calculate the recoverable amount as at 31 December 2019 (15 marks)There is no point in simply typing out a full question and expecting to be provided with a full answer. You must have an answer in the same book in which you found the question and so use our forums to ask about whatever it is in the answer that you are not clear about.
However, the topic in this question is not examinable in Paper FA – it is not in the syllabus.
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