Reference no: EM133145565

Question - IAS36 Impairment of assets prescribe the procedures that an entity applies to ensure that its assets are carried at no more than their recoverable amount.

A company acquired two (2) machines on 1 January 2015 at an amount of RM960,000 each. The machines are estimated to be used until 31 December 2026, with an estimated disposal value of RM60,000 each.

As at 31 December 2021, the company was in the discussion of disposed off the machines due to a drop of demand of the company's product produced by the machines.

If the company decided to continue in operation, the future cash inflows from using the machines was estimated at RM800,000 after taking into account the discount factor of the time value.

Alternatively, another company was offering to take over the machines at RM420,000 each.

Required - Determine the following:

(a) Total cost of the two machines,

(b) Useful life of the machines (in years),

(c) Residual value,

(d) Depreciable amount,

(e) Depreciation per annum,

(f) Accumulated depreciation as at 31 December 2021,

(g) Carrying value as at 31 December 2021,

(h) Fair value less cost of disposal as at 31 December 2021,

(i) Value in use as at 31 December 2021,

(j) Recoverable amount as at 31 December 2021,

(k) Impairment loss as at 31 December 2021.

(l) Explain how you determine the recoverable amount in (j) above.

(m) Explain the accounting treatment for the impairment loss in (k) above.