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Hi Mike,
Hope you could help me on this:
A company is intending to sell an asset with a carrying amount of $1 million. A seller has offered $200,000 for the asset but the directors believe they could sell it for $500,000.
The asset should be written down to $200,000, right?
“… but the directors believe they could sell it for $500,000.”
How strong is the directors’ belief and what’s the going rate in the second-hand market and do they have any supporting facts for their belief and ….
IF the asset is impaired, it should be reduced from its carrying value of $1 million to its recoverable amount
If that recoverable amount is the net selling price of $200,000, then that’s what it should be impaired to
Okay, I’ll watch out for those in the exam, thank you 🙂
You’re welcome