QUESTION 3 A. Kwick Ltd has a product line producing processed cocoa beans for export. The carrying 306 amount of the net assets employed on the line as at 31 December 2012 was GHS572,000. There is an indication that the export market would be adversely affected in 2015 by competition from producers of synthetic cocoa. The Finance Director estimates the net realizable value of the net assets as at 31/12/2012 to be only GHS350,000. The board of directors has approved a budget for the years ended 31/12/2013, 31/12/2014 and 31/12/2015. The assumptions underlying the budgets are: GHe Unit costs and revenue Selling price Buy in cost 50 (20) Production cost: 100 bobne Materials, Labour & Overhead Head office overhead apportioned Cash inflow per unit 000 Estimated sales volume 2012 2013 Estimates at 31/12/2012 2014 2015 11,000 4,000 8,000 The rate obtained elsewhere for companies in the same industry with similar size and risk profile (equivalent to discount factor) is 10% per annum. Required: Calculate the impairment loss, if any, on the net assets as at 31 December, 2012 (3.75) (1.25) 25.00
QUESTION 3 A. Kwick Ltd has a product line producing processed cocoa beans for export. The carrying 306 amount of the net assets employed on the line as at 31 December 2012 was GHS572,000. There is an indication that the export market would be adversely affected in 2015 by competition from producers of synthetic cocoa. The Finance Director estimates the net realizable value of the net assets as at 31/12/2012 to be only GHS350,000. The board of directors has approved a budget for the years ended 31/12/2013, 31/12/2014 and 31/12/2015. The assumptions underlying the budgets are: GHe Unit costs and revenue Selling price Buy in cost 50 (20) Production cost: 100 bobne Materials, Labour & Overhead Head office overhead apportioned Cash inflow per unit 000 Estimated sales volume 2012 2013 Estimates at 31/12/2012 2014 2015 11,000 4,000 8,000 The rate obtained elsewhere for companies in the same industry with similar size and risk profile (equivalent to discount factor) is 10% per annum. Required: Calculate the impairment loss, if any, on the net assets as at 31 December, 2012 (3.75) (1.25) 25.00
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:QUESTION 3
A. Kwick Ltd has a product line producing processed cocoa beans for export. The carrying
amount of the net assets employed on the line as at 31 December 2012 was GHS572,000.
There is an indication that the export market would be adversely affected in 2015 by
competition from producers of synthetic cocoa. The Finance Director estimates the net
realizable value of the net assets as at 31/12/2012 to be only GHS350,000.
The board of directors has approved a budget for the years ended 31/12/2013, 31/12/2014
and 31/12/2015.
The assumptions underlying the budgets are:
Unit costs and revenue
GH¢
50
Selling price
Buy in cost
(20)
bobne 100
Hand Production cost: 8105
(3.75)
Materials, Labour & Overhead
Head office overhead apportioned
Cash inflow per unit
(1.25)
25.00
Estimated sales volume
2012
2013
Estimates at 31/12/2012
2014 2015
8,000 11,000 4,000
The rate obtained elsewhere for companies in the same industry with similar size and risk
profile (equivalent to discount factor) is 10% per annum.
Required:
Calculate the impairment loss, if any, on the net assets as at 31 December, 2012
Р
JH
T100
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