Q20
Telepath Co also owns Rilda Co, a 100% subsidiary, which is treated as a cash generating unit. On 30 September 20X3, there was an impairment to Rilda’s assets of $3,500,000. The carrying amount of the assets of Rilda Co immediately before the impairment were:
$
Goodwill 2,000,000
Factory building 4,000,000
Plant 3,500,000
Receivables and cash (at recoverable amount) 2,500,000
in total: 12,000,000
Question: What is the carrying amount of Rilda Co’s plant at 30 September 20X3 after the impairment loss has been
correctly allocated to its assets?
A $2,479,000
B $2,800,000
C $2,211,000
D $3,500,000
I have no idea why the ans is D. Can I calculate it or it is only an estimation?
Thank You!
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Specimen Exam Q20
9y ago#1The answer isn't D - please tell me that the answer isn't D
Even if you WERE to estimate it, the answer couldn't be D
Surely the answer is B
yes, the ans is B sorry for my careless.
9y ago#3And you can arrive there can you?
No, I cannot
9y ago#5Impairment of $3,500,000
First to go (after any specific assets that are impaired) will be the goodwill of $2,000,000
That leaves a further $1,500,000 to be impaired against the remaining assets
The receivables and cash are already stated at their recoverable amount and we don't impair below recoverable amount
That leaves the factory building $4,000,000 and the plant $3,500,000 to be impaired on a pro-rata basis (a proportional basis)
The plant is 3,500,000/(3,500,000 + 4,000,000) of the total and that cancels down to 7/15
The factory is 4,000,000/(3,500,000 + 4,000,000) of the total and that cancels down to 8/15
OK so far?
we have $1,500,000 to impair and 7/15 of that amount relates to the plant
So a further $700,000 needs to be impaired against the plant (and $800,000 against the factory building)
That leaves the value of plant after impairment of $3,500,000 - $700,000 = $2,800,000 or answer B
OK?
understood
thank you sir!!
9y ago#7You're welcome
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