Bobs Ltd owns a plant that originally cost P700 000 on 01/01/2010 and has a carrying amount of P350 000 at 31/12/2015. T
Posted: Tue Apr 26, 2022 9:38 am
Bobs Ltd owns a plant that originally cost P700 000 on
01/01/2010 and has a carrying amount of
P350 000 at 31/12/2015. The plant is depreciated on a straight line
basis to a zero residual value
over a 10 year useful life. As per IAS 36 Bobs Ltd performed an
indicator review at 31/12/2015
to asset whether this asset might be impaired.
Initial information collected for the purpose of the review
included:
The accountant budgeted that net cash inflows will be slightly
reduced over the next 3 years
of usage, due to a drop in the market demand for the plant’s
output. The accountant’s opinion
is that there will be no market for the plant’s output after
31/12/2018.
The estimated fair value of the plant is P250,000.
Required:
Outline the reasons why you think this asset should be
impaired.
01/01/2010 and has a carrying amount of
P350 000 at 31/12/2015. The plant is depreciated on a straight line
basis to a zero residual value
over a 10 year useful life. As per IAS 36 Bobs Ltd performed an
indicator review at 31/12/2015
to asset whether this asset might be impaired.
Initial information collected for the purpose of the review
included:
The accountant budgeted that net cash inflows will be slightly
reduced over the next 3 years
of usage, due to a drop in the market demand for the plant’s
output. The accountant’s opinion
is that there will be no market for the plant’s output after
31/12/2018.
The estimated fair value of the plant is P250,000.
Required:
Outline the reasons why you think this asset should be
impaired.