of January 1, 2020 its carrying amount of the assets and liabilities of the plant are as follows: Goodwill allocated 200,000,000
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.
Case 9. The assets and liabilities of a manufacturing plant of Joy Company form a disposal group. The criteria for
classification are met on January 1, 2020, As of January 1, 2020 its carrying amount of the assets and liabilities of the
plant are as follows:
Land and building 150,000,000
Plant, machinery and equipment 491,700,000
Investment property 130,000,000
Receivables and financial assets 75,000,000
Inventories, net of writedown 110,000,000
Borrowings (300,000,000)
Carrying Value 856,700,000
The investment property has been reported at its current fair value at the reporting date December 31, 2020. The
receivables and financial assets were properly valued at 75,000,000. The inventories were properly valued at net realizable
value at the reporting date.
Negotiations to dispose of the manufacturing plant to JIT company is in the advanced stage and the buyer is willing to pay
a price of 603,400,000 to buy the plant as a whole. Cost to sell is estimated at 1,700,000.
9. What amount of loss should be recognized in the profit or loss at the time the plant was reclassified as a disposal
group?
a. None
b. (1,540,000)
c. (2,200,000)
d. (2,940,000)
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