Easy-going company acquired some Plant at a cost of $1.5million. As at 30 June 2014 the plant had accumulated depreciation of $250 000. On 30 June 2014 it was determined that the plant could be sold for a price of $800 000 and the costs associated with making the sale would be $40 000. The value in use is 738,000. Required: Determine whether an impairment loss needs to be recognized in relation to the machinery and, if so, provide the appropriate journal entry. Note: Provide all the calculations/working out. do not just write the answer.
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.
Easy-going company acquired some Plant at a cost of $1.5million. As at 30 June 2014 the plant had
Required:
Determine whether an impairment loss needs to be recognized in relation to the machinery and, if so, provide the appropriate
Note: Provide all the calculations/working out. do not just write the answer.
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