ACCA FR · Chapter 3 · Question 6 of 12
At the year end a machine owned by Redshank Co has a carrying amount of $900,000. It could be sold for $820,000, with disposal costs of $20,000. The present value of the future cash flows expected from using it is $760,000. What impairment loss should be recognised?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) $100,000
Explanation
Fair value less costs of disposal = $820,000 - $20,000 = $800,000. Value in use = $760,000. Recoverable amount is the higher of the two, $800,000. Impairment loss = $900,000 - $800,000 = $100,000.
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