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Question Bank IAS 36 With Answers

The document describes several questions related to measuring and accounting for asset impairment under accounting standards: Q1 asks the reader to calculate the recoverable amount of a machine whose sales have declined due to new competition. Q2 asks the reader to determine: a) the carrying amount of a machine over its first few years of depreciation, b) the impairment loss recognized when its recoverable amount declines, and c) the depreciation charge for the year it is impaired. Q3 provides information about a revalued machine and asks the reader to record the journal entry for the impairment loss recognized when its recoverable amount is lower than its carrying amount including revaluation surplus.

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3K views

Question Bank IAS 36 With Answers

The document describes several questions related to measuring and accounting for asset impairment under accounting standards: Q1 asks the reader to calculate the recoverable amount of a machine whose sales have declined due to new competition. Q2 asks the reader to determine: a) the carrying amount of a machine over its first few years of depreciation, b) the impairment loss recognized when its recoverable amount declines, and c) the depreciation charge for the year it is impaired. Q3 provides information about a revalued machine and asks the reader to record the journal entry for the impairment loss recognized when its recoverable amount is lower than its carrying amount including revaluation surplus.

Uploaded by

Monu Paracha
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Q1: Measurement of recoverable amount

A company has a machine in its statement of financial position at a carrying amount of


Rs.300,000.

The machine is used to manufacture the company’s best-selling product range, but the entry of a
new competitor to the market has severely affected sales.

As a result, the company believes that the future sales of the product over the next three years will
be only Rs.150,000, Rs.100,000 and Rs.50,000. The asset will then be sold for Rs.25, 000.

An offer has been received to buy the machine immediately for Rs.240,000, but the company
would have to pay shipping costs of Rs.5, 000.The risk-free market rate of interest is 10%.

Required:
Market changes indicate that the asset may be impaired and so the recoverable amount for the
asset must be calculated.

Q2: Depreciation of impaired asset


On 1 January Year 1 Entity Q purchased for Rs.240,000 a machine with an estimated useful life of
20 years and an estimated zero residual value.

Depreciation is on a straight-line basis.

On 1 January Year 4 an impairment review showed the machine’s recoverable amount to be


Rs.100,000 and its remaining useful life to be 10 years.
Required:
a) The carrying amount of the machine on 31 December Year 2 and year 3 (immediately before the
impairment).
b) The impairment loss recognized in the year to 31 December Year 4.

c) The depreciation charge in the year to 31 December Year 4.

Q3: Impairment loss of a revalued asset

A company has a machine in its statement of financial position at a carrying amount of Rs.300,000 including
a previously recognized surplus of Rs.20,000.
The machine has been tested for impairment and found to have recoverable amount of Rs.275,358.

Required:

Record double entry for the impairment loss.

Question: 3
Question 4:

Question 6:
Question 7:

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