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Determine the carrying amount to be reported as ppe

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Reference no: EM132532653

Question 1: Your company also acquired a machine with four year of useful economic life on January 1 2018 and the costs associated with it were as follows.

Cost (000)

Price Birr 1,200

Non - refundable Customs duty Tax 60

Other cost 140

Total Birr 1,400

At the end of its life it's expected to be sold for 200,000 birr. And also the company year end is July 7.

Requirement

1.1. Record the journal entry at acquisition.

1.2. Determine the carrying amount to be reported as PPE at the end of the year. (Assume deprecation rate: Straight line method with no salvage value)

1.3. Assume also that at the end of 2019 there is an impairment loss of 100,000 birr on the asset, so who much will be reported as carrying amount as PPE after impairment.

Question 2: A company must restore a mine by law, and it has provided €500,000 for the cost of restoration which is equal to the present value of restoration costs. The CGU is the mine as a whole. Offers of €800,000 have been received to buy the mine and disposal costs are negligible. If the mine is sold, the buyer will assume responsibility for the restoration costs. The value in use is €1,200,000 excluding restoration costs and the carrying amount is €750,000

Required:

2.1. What is the impairment loss, if any?

2.2. Show the necessary journal entry

Reference no: EM132532653

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