Consider the following information relating to five different items of plant and equipment at the reporting date. Carrying amount Fair value Costs of disposal %24 Value in use Asset A 100 000 105 000 45 000 3000 110000 50 000 48 000 82 000 B 1000 C 80 000 85 000 2000 220000 115 000 D 200 000 190 000 120 000 5000 120 000 3000 Required a. Calculate the recoverable amount for each of the five items of plant and equipment. b. Assuming plant and equipment is carried under the cost model, determine the amount of any impairment adjustment necessary. c. Assuming plant and equipment is carried under the revaluation model, determine the amount of any revaluation adjustment necessary.

Consider the following information relating to five different items of plant and equipment at the reporting date. Carrying amount Fair value Costs of disposal %24 Value in use Asset A 100 000 105 000 45 000 3000 110000 50 000 48 000 82 000 B 1000 C 80 000 85 000 2000 220000 115 000 D 200 000 190 000 120 000 5000 120 000 3000 Required a. Calculate the recoverable amount for each of the five items of plant and equipment. b. Assuming plant and equipment is carried under the cost model, determine the amount of any impairment adjustment necessary. c. Assuming plant and equipment is carried under the revaluation model, determine the amount of any revaluation adjustment necessary.

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Description: Consider the following information relating to five different items of plant and equipment at the reporting date.Fair valueCosts of disposal2$Carrying amountValue in useAssetA100 00050 000105 000300011000045 00085 00048 00082 000B100080 0002000200 0

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Depreciation Methods

The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.

Depreciation Accounting

In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.

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Question

Consider the following information relating to five different items of plant and equipment at the reporting date.
Fair value
Costs of disposal
2$
Carrying amount
Value in use
Asset
A
100 000
50 000
105 000
3000
110000
45 000
85 000
48 000
82 000
B
1000
80 000
2000
200 000
120 000
190 000
120 000
5000
220000
115000
E
3000
Required
a. Calculate the recoverable amount for each of the five items of plant and equipment.
b. Assuming plant and equipment is carried under the cost model, determine the amount of any impairment
adjustment necessary.
C. Assuming plant and equipment is carried under the revaluation model, determine the amount of any
revaluation adjustment necessary.

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