impairment loss
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.
At 30 June 2017, there was an indication that Botany Ltd's machinery might be impaired. In preparing for the impairment testing, you have estimated, as at 30 June 2017, the piece of machinery's fair value less costs of disposal to be $350 000 and its value in use to be $354 000. The machinery had been purchased and installed on 1 October 2016 for $625 000 cash, with a residual value of $25 000 and useful life of 10 years. Botany Ltd uses the straight-line method of
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