Reference no: EM132869321

On 1 January 2013, Milly Bhd. acquired an oil delivery truck. Management estimated the useful life of the truck at nine years with zero residual value. Milly Bhd. determined that straight-line depreciation is appropriate. At 31 December 2013, the truck has a carrying amount of RM240 000 (original cost of RM270 000 less accumulated depreciation of RM30 000).

In 2014, because of a sharp downturn in demand for fuel oil, Milly Bhd. dramatically decreased its use of this truck. Consequently, at 31 December 2014, management re-estimates the truck's remaining useful life at 5 years, during which the truck is expected to provide the following net cash flows:

2015 = RM60 000

2016 = RM55 000

2017 = RM50 000

2018 = RM35 000

2019 = RM15 000

• The appropriate rate to discount these future cash flows to their risk-adjusted present value is 10 per cent per year.
• At 31 December 2014, the market price for the truck is RM154 000. If the truck was sold, license and title fees of RM4 000 would be paid.

Required:

Problem (a) Determine the amount of impairment loss, if any, for Milly Bhd.'s truck at 31 December 2014 and prepare the journal entry, if required, to record the impairment.