Determine impairment loss needs to be recognised

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Question - Simpson Ltd purchased a piece of plant at a cost of $200,000. Simpson has a 30 June year end. At 30 June 2019, the plant had accumulated depreciation of $40,000 and an expected remaining useful life of 4 years. On 30 June 2019, Simpson determined that the plant could be sold for $120,000 with associated costs of $5,000. Alternatively, the plant is expected to be used by Simpson for another 4 years and it is expected that the net cash flows to be generated from the Plant would be $39,000 over each of the next 4 years. At 30 June 2019, it is considered that the market would require a return of 6% on this item of plant.

Required -

a) Determine if any impairment loss needs to be recognised in relation to this plant at 30 June 2019.

b) Provide the depreciation entry for this plant item at 30 June 2020.

Reference no: EM132872464

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