On 1 October 2019, company X (with a year-end as at 30th Sept) acquired an item of machinery for £10,720. During the year, the machinery had got damaged and was underperforming, although it was still being used. By 30 September 2020, following the damage, the item of machinery had an estimated remaining useful life of two years, a value in use of £6,300 and a fair value of £6,400. The costs to sell the item of machinery amounted to £500. Company X depreciates machinery on a reducing balance basis at a rate of 20% per annum. Compute the impairment loss in relation to the aforementioned item of machinery to be shown in company X’s income statement for the year ending 30th September 2020.
On 1 October 2019, company X (with a year-end as at 30th Sept) acquired an item of machinery for £10,720. During the year, the machinery had got damaged and was underperforming, although it was still being used. By 30 September 2020, following the damage, the item of machinery had an estimated remaining useful life of two years, a value in use of £6,300 and a fair value of £6,400. The costs to sell the item of machinery amounted to £500. Company X depreciates machinery on a reducing balance basis at a rate of 20% per annum. Compute the impairment loss in relation to the aforementioned item of machinery to be shown in company X’s income statement for the year ending 30th September 2020.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On 1 October 2019, company X (with a year-end as at 30th Sept) acquired an item of machinery for
£10,720. During the year, the machinery had got damaged and was underperforming, although it was still
being used. By 30 September 2020, following the damage, the item of machinery had an estimated
remaining useful life of two years, a value in use of £6,300 and a fair value of £6,400. The costs to sell the
item of machinery amounted to £500. Company X
a rate of 20% per annum.
Compute the impairment loss in relation to the aforementioned item of machinery to be shown in company
X’s income statement for the year ending 30th September 2020.
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