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MC Question 4

Metric owns an item of plant which has a carrying amount of $248,000 as at 1 April 2014.

It is being depreciated at 12½% per annum on a reducing balance basis.

The plant is used to manufacture a specific product which has been suffering a slow decline in sales.

Metric has estimated that the plant will be retired from use on 31 March 2017.

The estimated net cash flows from the use of the plant and their present values are:

Net cash flows Present values
$$
Year to 31 March 2015 120,000 109,200
Year to 31 March 2016 80,000 66,400
Year to 31 March 2017 52,000 39,000

252,000

214,600

On 1 April 2015, Metric had an alternative offer from a rival to purchase the plant for $200,000.

At what value should the plant appear in Metric’s statement of financial position as at 31 March 2015?

A     $248,000
B     $217,000
C     $214,600
D     $200,000