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Lokton plc has a piece of equipment which it bought on 1 January 2014 for £2,000,000. The equipment has been depreciated annually at a rate of 10% on cost (with a zero disposal value assumed at the end of its useful life). At the year-end on 30 December 2020, the fair value of the equipment was £640,000. The value in use of this asset is estimated at £560,000. The current costs to sell the equipment amount to £100,000. What is the impairment loss? Select one: a. £0 b. £160,000 c. £40,000 d. £396,594 e. £2,000 f. £240,000 g. £502,882

Lokton plc has a piece of equipment which it bought on 1 January 2014 for £2,000,000. The equipment has been depreciated annually at a rate of 10% on cost (with a zero disposal value assumed at the end of its useful life). At the year-end on 30 December 2020, the fair value of the equipment was £640,000. The value in use of this asset is estimated at £560,000. The current costs to sell the equipment amount to £100,000. What is the impairment loss? Select one: a. £0 b. £160,000 c. £40,000 d. £396,594 e. £2,000 f. £240,000 g. £502,882

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Lokton plc has a piece of equipment which it bought on 1 January 2014 for £2,000,000. The equipment has been depreciated annually at a rate of 10% on cost (with a zero disposal value assumed at the end of its useful life). At the year-end on 30 December 2020, the fair value of the equipment was £640,000. The value in use of this asset is estimated at £560,000. The current costs to sell the equipment amount to £100,000.

What is the impairment loss?

Select one:
a.
£0
b.
£160,000
c.
£40,000
d.
£396,594
e.

£2,000

f.
£240,000
g.
£502,882
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Shouldn't we deduct costs to sell the equipment amount of £100,000 from Fair value to get Net Selling Price which will be £540,000 so $40,000 impairment?

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