Reference no: EM132906034

Question - Quantico Ltd acquired some machinery at a cost of $3 000 000. As at 30 June 2021 the machinery had accumulated depreciation of $600 000 and an expected remaining useful life of four years.

On 30 June 2021 it was determined that the machinery could be sold at a price of $1 800 000 and that the costs associated with making the sale would be $75 000. Alternatively, the machinery is expected to be useful for another four years and it is expected that the net cash flows to be generated from the machine would be $520 000 over each of the next four years.

It is assessed that on 30 June 2021 the market would require a rate of return of 6 per cent on this type of machinery. The present value of an annuity of $1 for four years discounted at 6 per cent is 3.4651.

Required - Determine whether any impairment loss needs to be recognised in relation to the machinery and, if so, provide the appropriate journal entry at 30 June 2021. Also, provide the journal entry to account for depreciation in 30 June 2022.