THE FOLLOWING INFORMATION RELATES TO Q 16 to Q 18 On 1 January 2020, the following information is available about a Rocket owned by Longford Company: Cost $95,000,000; Accumulated Depreciation $45,000,000. Until 1 January 2020, the Rocket has not had any Loss on Impairment. On 1 January 2020, Longford Company finds that the Recoverable Amount of the Rocket is $40,000,000. The remaining life of the Rocket on 1 January 2020 is 5 years and the Residual Value is zero. On 1 January 2021, Longford Company finds that the Recoverable Amount of the Rocket is $37,000,000. Q 16 What is the Loss on Impairment (if any) on the Rocket on 1 January 2020? Q 17 What is the Recovery of Impairment Loss (if any) on the Rocket on 1 January 2021? Q 18 What is the Carrving Amount of the Rocket on 31 December 20212
THE FOLLOWING INFORMATION RELATES TO Q 16 to Q 18 On 1 January 2020, the following information is available about a Rocket owned by Longford Company: Cost $95,000,000; Accumulated Depreciation $45,000,000. Until 1 January 2020, the Rocket has not had any Loss on Impairment. On 1 January 2020, Longford Company finds that the Recoverable Amount of the Rocket is $40,000,000. The remaining life of the Rocket on 1 January 2020 is 5 years and the Residual Value is zero. On 1 January 2021, Longford Company finds that the Recoverable Amount of the Rocket is $37,000,000. Q 16 What is the Loss on Impairment (if any) on the Rocket on 1 January 2020? Q 17 What is the Recovery of Impairment Loss (if any) on the Rocket on 1 January 2021? Q 18 What is the Carrving Amount of the Rocket on 31 December 20212
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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.
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