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i. Insight Corp. acquired an item of plant at a cost of $800,000 on 1 April 20X0 that is used to produce and package pharmaceutical pills. The plant had an estimated residual value of $50,000 and an estimated life of five years, neither of which has changed. Insight Corp. uses straight-line depreciation. On 31 March 20X2, Insight Corp. was informed by a major customer (who buys products produced by the plant) that it would no longer be placing orders with Insight Corp.. Even before this information was known, Insight Corp. had been having difficulty finding work for this plant. It now estimates that net cash inflows earned from the plant for the next three years will be: В. $'000 Year ended: 31 March 20X3 220 31 March 20X4 180 31 March 20X5 170 On 31 March 20X5, the plant is still expected to be sold for its estimated realisable value. Insight Corp. has confirmed that there is no market in which to sell the plant at 31 March 20X2. Insight Corp.'s cost of capital is 10% and the following values should be used Value of $1 at: $ End of year 1 0.91 End of year 2 End of year 3 0.83 0.75 ii. Insight Corp. owned a 100% subsidiary, Tilda, that is treated as a cash generating unit. On 31 March 20X2, there was an industrial accident (a gas explosion) that caused damage to some The assets of Tilda immediately before the accident were: Tilda's plant. Goodwill 1,800 Patent 1,200 Factory building 4,000 Plant 3,500 Receivables and cash 1,500 12,000 As a result of the accident, the recoverable amount of Tilda is $6.7 million. The explosion destroyed (to the point of no further use) an item of plant that had a carrying amount of $500,000. Tilda has an open offer from a competitor of $1 million for its patent. The receivables and cash are already stated at their fair values less costs to sell (net realisable values).

i. Insight Corp. acquired an item of plant at a cost of $800,000 on 1 April 20X0 that is used to produce and package pharmaceutical pills. The plant had an estimated residual value of $50,000 and an estimated life of five years, neither of which has changed. Insight Corp. uses straight-line depreciation. On 31 March 20X2, Insight Corp. was informed by a major customer (who buys products produced by the plant) that it would no longer be placing orders with Insight Corp.. Even before this information was known, Insight Corp. had been having difficulty finding work for this plant. It now estimates that net cash inflows earned from the plant for the next three years will be: В. $'000 Year ended: 31 March 20X3 220 31 March 20X4 180 31 March 20X5 170 On 31 March 20X5, the plant is still expected to be sold for its estimated realisable value. Insight Corp. has confirmed that there is no market in which to sell the plant at 31 March 20X2. Insight Corp.'s cost of capital is 10% and the following values should be used Value of $1 at: $ End of year 1 0.91 End of year 2 End of year 3 0.83 0.75 ii. Insight Corp. owned a 100% subsidiary, Tilda, that is treated as a cash generating unit. On 31 March 20X2, there was an industrial accident (a gas explosion) that caused damage to some The assets of Tilda immediately before the accident were: Tilda's plant. Goodwill 1,800 Patent 1,200 Factory building 4,000 Plant 3,500 Receivables and cash 1,500 12,000 As a result of the accident, the recoverable amount of Tilda is $6.7 million. The explosion destroyed (to the point of no further use) an item of plant that had a carrying amount of $500,000. Tilda has an open offer from a competitor of $1 million for its patent. The receivables and cash are already stated at their fair values less costs to sell (net realisable values).

FINANCIAL ACCOUNTING
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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i. Insight Corp. acquired an item of plant at a cost of $800,000 on 1 April 20X0 that is used to produce and package pharmaceutical pills. The plant had an estimated residual value of $50,000 and an estimated life of five years, neither of which has changed. Insight Corp. uses straight-line depreciation. On 31 March 20X2, Insight Corp. was informed by a major customer (who buys products produced by the plant) that it would no longer be placing orders with Insight Corp.. Even before this information was known, Insight Corp. had been having difficulty finding work for this plant. It now estimates that net cash inflows earned from the plant for the next three years will be: B. Year ended: 000.$ 31 March 20X3 220 31 March 20X4 180 31 March 20X5 170 On 31 March 20X5, the plant is still expected to be sold for its estimated realisable value. Insight Corp. has confirmed that there is no market in which to sell the plant at 31 March 20X2. Insight Corp.'s cost of capital is 10% and the following values should be used Value of $1 at: End of year 1 End of year 2 End of year 3 $ 0.91 0.83 0.75 ii. Insight Corp. owned a 100% subsidiary, Tilda, that is treated as a cash generating unit. On 31 March accident (a gas explosion) that there was an damage to some of Tilda's plant. The assets of Tilda immediately before the accident were: Goodwill 1,800 Patent 1,200 Factory building 4,000 Plant 3,500 Receivables and cash 1,500 12,000 As a result of the accident, the recoverable amount of Tilda is $6.7 million. The explosion destroyed (to the point of no further use) an item of plant that had a carrying amount of $500,000. Tilda has an open offer from a competitor of $1 million for its patent. The receivables and cash are already stated at their fair values less costs to sell (net realisable values).
Transcribed Image Text:i. Insight Corp. acquired an item of plant at a cost of $800,000 on 1 April 20X0 that is used to produce and package pharmaceutical pills. The plant had an estimated residual value of $50,000 and an estimated life of five years, neither of which has changed. Insight Corp. uses straight-line depreciation. On 31 March 20X2, Insight Corp. was informed by a major customer (who buys products produced by the plant) that it would no longer be placing orders with Insight Corp.. Even before this information was known, Insight Corp. had been having difficulty finding work for this plant. It now estimates that net cash inflows earned from the plant for the next three years will be: B. Year ended: 000.$ 31 March 20X3 220 31 March 20X4 180 31 March 20X5 170 On 31 March 20X5, the plant is still expected to be sold for its estimated realisable value. Insight Corp. has confirmed that there is no market in which to sell the plant at 31 March 20X2. Insight Corp.'s cost of capital is 10% and the following values should be used Value of $1 at: End of year 1 End of year 2 End of year 3 $ 0.91 0.83 0.75 ii. Insight Corp. owned a 100% subsidiary, Tilda, that is treated as a cash generating unit. On 31 March accident (a gas explosion) that there was an damage to some of Tilda's plant. The assets of Tilda immediately before the accident were: Goodwill 1,800 Patent 1,200 Factory building 4,000 Plant 3,500 Receivables and cash 1,500 12,000 As a result of the accident, the recoverable amount of Tilda is $6.7 million. The explosion destroyed (to the point of no further use) an item of plant that had a carrying amount of $500,000. Tilda has an open offer from a competitor of $1 million for its patent. The receivables and cash are already stated at their fair values less costs to sell (net realisable values).
Required Calculate the carrying amounts of the assets in (i) and (ii) above at 31 March 20X2 after applying any impairment losses. Calculations should be to the nearest $1,000.
Transcribed Image Text:Required Calculate the carrying amounts of the assets in (i) and (ii) above at 31 March 20X2 after applying any impairment losses. Calculations should be to the nearest $1,000.
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