Impairment of Assets Test

IMPAIRMENT OF ASSETS The behindcited notice relates to Q1 & Q2. Information environing three possessions are abandoned inferiorneathneath in the table: Aldo Balbo Casco Value in Use $150,000 $195,000 $105,000 Carrying Totality $90,000 $140,000 $112,000 Net Realizable Rate $115,000 $136,000 $85,000 Q1. What are the redeemable sumitys of each asset? (MCQ) Aldo ($115,000), Balbo ($136,000), Casco ($105,000) Aldo ($150,000), Balbo ($136,000), Casco ($105,000) Aldo ($150,000), Balbo ($195,000), Casco ($105,000) Aldo ($115,000), Balbo ($195,000), Casco ($85,000) (2 marks) Q2. What are the faintness forfeiturees on each asset? (MCQ) Aldo ($0), Balbo ($0), Casco ($0) Aldo ($0), Balbo ($55,000), Casco ($20,000) Aldo ($25,000), Balbo ($4,000), Casco ($7,000) Aldo ($0), Balbo ($0), Casco ($7,000) (2 marks) Q3. A currency-generating individual has the behindcited possessions: Building $600,000 Plant & Machinery $100,000 Goodobtain $80,000 Inventory $50,000 Total $830,000 One of the mediums rated at $60,000 has been injured & obtain be scrapped. The completion redeemable sumity estimated from the currency-generating individual is $470,000. What is the redeemable sumity of the popular possessions behind the faintness forfeiture? (MCQ) $21,800 $28,000 $33,500 $50,000 (2 marks) Q4. Which of the behindcited unexceptionably defines the redeemable sumity of an asset? (MCQ) Current bargain rate of the asset near absorb of division Higher of serene rate near absorb of division & rate in use Higher of carrying sumity & serene rate Lower of serene rate near absorb of division & rate in use (2 marks) Q5. An asset has a carrying sumity of $55,000 at the year-end 31st March 2002. Its bargain rate is $47,000 having a division absorb of $3,500. A new asset obtain absorb $85,000. The concourse expects that the asset obtain beget $19,000/per annum of currency flows for the direct three years. The absorb of important is 8%. What is the faintness forfeiture to be methodic for the year end 31st March 2002? (FIB) 3613151270000$ (2 marks) Q6. Which of the behindcited are interior notes of faintness? (MRQ) A descend in the bargain rate of a medium due to inflation The skill realized that an asset is unqualified to product up to its bountiful size A narration cheerful by the depot superintendent than one of the lifter cars has crashed into a forbearance The bud of plan of skill to vend the asset during the direct 3 months (2 marks) Q7. Moby had purchased an asset on 1st September 2009 at a absorb of $500,000 behind a while the adapted activity of ten years behind a while no currency inflow at the term of division. The asset has been depreciated until 31st October 2014. At that epoch, an property occurred which resulted in the hurt of the asset & an faintness proof was smitten by Moby. On 31st October 2014, the serene rate of the asset was $160,000 behind a while $10,000 absorb of division. The expected advenient currency flows were $13,000/annum for the direct five years. The absorb of important is at 10% behind a while five-year annuity content of 3.79. Calculate the faintness on 31st October 2014? (MCQ) $0 $100,000 $150,970 $200,730 (2 marks) Q8. A currency-generating individual has the behindcited possessions: Property & Insert $400,000 Machinery $90,000 Goodobtain $75,000 License $5,000 Net Possessions (realizable rate) $30,000 Total $600,000 The concourse had breached a synod synod which results in its currency-generating individual rate to descend by $200,000. What obtain be the rate of Property & Insert behind the faintness? (MCQ) $101,010 $126,316 $266,667 $298,990 (2 marks) Q9. Which of the behindcited is not an indicator of faintness? (MCQ) The NRV of schedule has declining due to hurts but carrying sumity is peaceful inferiored it's than NRV Technological progression has boomed in a empire resulting old mediumry proper obsolete Cost of important of a concourse has growthd due to growth in bargain rates The carrying sumity of an asset is excellent of the redeemable sumity of an asset (2 marks) Q10. A concourse purchased an asset on 1st January 2000 absorbing $2.1 favorite and its activity was 10 years. On 31st December 2001, the serene rate of the possessions was $1.9 favorite. On 31st December 2002, the redeemable sumity of the asset was $0.7 favorite. Calculate the faintness forfeiture to be narrative in Profit ; Forfeiture statement on 31st December 2002? (FIB) 3613151270000$ (2 marks) Q11. A currency-generating individual has the behindcited possessions: Building $409,050 Plant ; Machinery $311,000 Goodobtain $30,500 Inventory $156,000 Total $906,550 One of the inserts rated at $91,000 was destroyed ; obtain be scrapped. The completion redeemable sumity estimated from the currency-generating individual is $760,050. What is the redeemable sumity of the Insert ; Machinery behind the faintness forfeiture? (FIB) 3613151270000$ (2 marks) Q12. Meagan had purchased an asset on 1st September 2015 at a absorb of $300,000 behind a while the adapted activity of six years behind a while no residual rate. The asset has been depreciated until 31st October 2020. At that epoch, the asset was injured ; an faintness proof was smitten by Moby. On 31st October 2020, the serene rate of the asset was $60,000 behind a while a $3,000 absorb of division. The expected advenient currency flows were $16,000/annum for the direct five years. The absorb of important is at 13% behind a while five-year annuity content of 3.52. Calculate the faintness on 31st October 2020? (MCQ) $0 $680 $6,320 $7,000 (2 marks) Q13. A exhibition van has a carrying sumity of $39,000 at the year-end 31st March 2016. Its bargain rate is $33,800 having a division absorb of $1,250. A new exhibition van obtain absorb $46,500. The concourse expects that the van can beget $9,300/per year of currency flows for the direct indecent years. The absorb of important is 5%. What is the faintness forfeiture to be methodic for the year end 31st March 2016? (MCQ) $1,250 $5,200 $6,022 $6,450 (2 marks) Q14. ZZZ Co purchased a non-popular asset on 1st January 2012 absorbing $3.75 favorite and its activity was prospect years. On 31st December 2013, the serene rate of the non-popular asset was $2.95 favorite. On 31st December 2014, the redeemable sumity of the asset was $1.25 favorite. Calculate the faintness forfeiture to be narrative in Profit ; Forfeiture statement on 31st December 2014 direct to $000? (FIB) 3613151270000$ 000 (2 marks) IMPAIRMENT OF ASSETS (ANSWERS) Q1. C Recoverable sumity is the excellent of the Rate in Use or the Net Realizable Value. Q2. D Impairment forfeiture = Carrying sumity – Redeemable sumity = Positive (+) Aldo = $90,000 - $150,000 = (-$60,000) No Impairment Balbo = $140,000 - $195,000 = (-$55,000) No Impairment Casco = $112,000 - $105,000 = $7,000 Impairment Q3. D Assets which entertain their own faintness criteria do not descend inferiorneathneath the drift of IAS 32 -Impairment of asset. Schedule is deteriorated inferiorneathneath IAS 2 - Schedule where it is adapted by choosing inferior of Absorb or Net Realizable Value. Q4. B Q5. $6,037 Value in Use Cash Flow Discount Content 8% Present Value 19,000 0.926 $17,594 19,000 0.857 $16,283 19,000 0.794 $15,086 Total PV $48,963 Fair Rate near Absorb to vend = $47,000 - $3,500 = $43,500 Higher of = $48,963 Impairment Forfeiture = $55,000 - $48,963 = $6,037 Q6. A descend in the bargain rate of a medium due to inflation (External note) The skill realized that an asset is unqualified to product up to its bountiful size (Internal note) A narration cheerful by the depot superintendent than one of the lifter cars has crashed into a forbearance (Internal note) The bud of plan of skill to vend the asset during the direct 3 months (Internal note) Q7. B Carrying Totality = (500,000 × 5/10) = 250,000 Fair rate near absorb to vend = (160,000 – 10,000) = 150,000 Value in use = (13,000 × 3.79) = 49,270 Recoverable sumity $150,000, Faintness = 250,000 – 150,000 = $100,000 Q8. D The completion faintness of CGU is $200,000 The goodobtain is deteriorated by $75,000 leaving $125,000 of faintness to be allocated to other possessions. Total of possessions to be deteriorated is $495,000 (400 + 90 +5) Impairment = (400,000 ÷ 495,000) × 125,000 = 101,010 Fair Rate behind faintness = 400,000 – 101,010 = $298,990 Q9. A The NRV of the schedule is peaceful senior than its carrying sumity so no faintness has arisen Q10. $742,500 Calculation produced in $000 Cost = 2,100 Depreciation = (2,100 × 2/10) = 420 Carrying sumity (After 2 years) = 2,100 – 420 = 1,680 Revaluation of asset = 1,680 1,900 = 220 in Revaluation Reserve New Absorb = 1,900 Depreciation = (1,900 × 1/8) = 237.5 Carrying sumity (After 1 year) = 1,900 – 237.5 = 1,662.5 Impairment forfeiture = 1,662.5 – 700 = 962.5 Reversal of Revaluation Reserve = $220 Excess narrative in Profit ; Forfeiture statement = 962.5 – 220 = $742,500 Q11. $211,257 The completion faintness of CGU is $146,500 The goodobtain is deteriorated by $30,500 leaving $116,000 of faintness to be allocated to other possessions. The insert is deteriorated by $91,000 leaving $25,000 of faintness Total of possessions to be deteriorated is $629,050 (409,050 + 311,000 – 91,000) Impairment = (220,000 ÷ 629,050) × 25,000 = 8,743 Fair Rate behind faintness = 220,000 – 8,743 = $211,257 Q12. A Carrying Totality = (300,000 × 1/6) = 50,000 Fair rate near absorb to vend = (60,000 – 3,000) = 57,000 Value in use = (16,000 × 3.52) = 56,320 Recoverable sumity $57,000, Faintness = 50,000 – 57,000 = $0 Q13. C Value in Use Cash Flow Annuity Content 5% (1-4) Present Value 9,300 3.546 $32,978 Total PV $32,978 Fair Rate near Absorb to vend = $33,800 - $1,250 = $32,550 Higher of = $32,978 Impairment Forfeiture = $39,000 - $32,978 = $6,022 Q14. $1,071,000 Calculation produced in $000 Cost = 3,750 Depreciation = (3,750 × 2/8) = 937.5 Carrying sumity (After 2 years) = 3,750 – 937.5 = 2,812.5 Revaluation of asset = 2,812.5 2,950 = 137.5 in Revaluation Reserve New Absorb = 2,950 Depreciation = (2,950 × 1/6) = 491.67 Carrying sumity (After 1 year) = 2,950 – 491.67 = 2,458.33 Impairment forfeiture = 2,458.33 – 1,250 = 1,208.33 Reversal of Revaluation Reserve = $137.5 Excess narrative in Profit ; Forfeiture statement = 1,208.33 – 137.5 = $1,070,830 Nearest to $000 = $1,071,000