Entity A owns a motor van that was involved in an accident at the year-end of 2020. This motor van is barely useable, so the value in use is estimated at $1,500,000. However, the motor van is a common model and there is a demand for its parts. This results in the fair value of $3,600,000 and costs of disposal of $100,000 respectively. On 1 January 2020, the carrying amount of the motor van was $8,000,000 and the van was estimated to have a remaining useful life of 8 years. REQUIRED: According to the accounting standards, prepare the relevant journal entries related to the impairment loss on 31 December 2020. ACCOUNTS FOR INPUT: | Plant | Motor van | Machine | Land | Building | Bank | Payable | Receivable | No entry | | Retained earnings | Other income | Other expense |Interest expense | Interest revenue | | Depreciation | Accum. depreciation | Impairment loss | Reversal of impairment loss | | Restoration liability | Loss on disposal | Gain on disposal | Revaluation surplus | Revaluation deficit |
Entity A owns a motor van that was involved in an accident at the year-end of 2020.
This motor van is barely useable, so the value in use is estimated at $1,500,000. However, the motor van is a common model and there is a demand for its parts. This results in the fair value of $3,600,000 and costs of disposal of $100,000 respectively.
On 1 January 2020, the carrying amount of the motor van was $8,000,000 and the van was estimated to have a remaining useful life of 8 years.
REQUIRED:
According to the accounting standards, prepare the relevant
ACCOUNTS FOR INPUT:
| Plant | Motor van | Machine | Land | Building | Bank | Payable | Receivable | No entry |
|
|
| Restoration liability | Loss on disposal | Gain on disposal | Revaluation surplus | Revaluation deficit |
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