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