Calculate the impairment loss on the asset

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Question - Litterbug Ltd bought a machine on January 1, 2018, incurring a purchase price of $15.8 million in addition to freight and installation costs of $1.6 million. At the date of purchase the machine had an estimated useful life of ten years, and was to be depreciated using a straight-line basis to a nil residual value. However, due to major operational changes, the company's management commenced processes to sell the machine so a new one could be purchased. The sale was deemed highly probable effective August 31, 2021, when a buyer was identified. The machine has a fair value of $10.1 million, with disposal costs amounting to $0.6 million.

Required -

1. Show the carrying value of the asset as at the date of its reclassification.

2. Calculate the impairment loss on the asset resulting from the reclassification.

3. Prepare the relevant financial statements extracts for the year ending December 31, 2021.

Reference no: EM133184365

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