Richfield uses a machine in the manufacturing of components. In December 2009, a competitor launched its own range of components. These components are being offered at a much lower price. The Company forecasts a 40-50% fall in sales over the next three years. Following detailed assessments Richfield has provided you with the following information: The carrying value of the machine at the date of calculation is R35, 000 The asset is currently depreciated on the straight line basis at a rate of 5% and has a remaining useful life of five years. The value of the asset on the second hand market is R 12,000. Costs to sell the asset are expected to amount to R 3,000. Discounted net cash Inflows from the asset over the asset's remaining useful life (including disposal proceeds) has been assessed at R9, 700. The current residual value of the asset has been estimated at R1, 200 What is the amount of the impairment loss?

Richfield uses a machine in the manufacturing of components. In December 2009, a competitor launched its own range of components. These components are being offered at a much lower price. The Company forecasts a 40-50% fall in sales over the next three years. Following detailed assessments Richfield has provided you with the following information: The carrying value of the machine at the date of calculation is R35, 000 The asset is currently depreciated on the straight line basis at a rate of 5% and has a remaining useful life of five years. The value of the asset on the second hand market is R 12,000. Costs to sell the asset are expected to amount to R 3,000. Discounted net cash Inflows from the asset over the asset's remaining useful life (including disposal proceeds) has been assessed at R9, 700. The current residual value of the asset has been estimated at R1, 200 What is the amount of the impairment loss?

FINANCIAL ACCOUNTING

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ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Question

Richfield uses a machine in the manufacturing of components. In December 2009, a competitor launched its own range of components. These components are being offered at a
much lower price. The Company forecasts a 40-50% fall in sales over the next three years.
Following detailed assessments Richfield has provided you with the following information:
The carrying value of the machine at the date of calculation is R35, 000
The asset is currently depreciated on the straight line basis at a rate of 5% and has a remaining useful life of five years
The value of the asset on the second hand market is R 12,000. Costs to sell the asset are expected to amount to R 3,000.
Discounted net cash Inflows from the asset over the asset's remaining useful life (including disposal proceeds) has been assessed at R9, 700.
The current residual value of the asset has been estimated at R1, 200
What is the amount of the impairment loss?

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