MC Question 20
Aphrodite Co has a year end of 31 December and operates a factory which makes computer chips for mobile phones.
It purchased a machine on 1 July 20X3 for $80,000 which had a useful life of ten years and is depreciated on the
straight-line basis, time apportioned in the years of acquisition and disposal.
The machine was revalued to $81,000 on 1 July 20X4.
There was no change to its useful life at that date.
A fire at the factory on 1 October 20X6 damaged the machine leaving it with a lower operating capacity.
The accountant considers that Aphrodite Co will need to recognise an impairment loss in relation to this damage.
The accountant has ascertained the following information at 1 October 20X6:
| (1) | The carrying amount of the machine is $60,750. |
|---|---|
| (2) | An equivalent new machine would cost $90,000. |
| (3) | The machine could be sold in its current condition for a gross amount of $45,000. Dismantling costs would amount |
| (4) | In its current condition, the machine could operate for three more years which gives it a value in use figure of |
On 1 July 20X7, it is discovered that the damage to the machine is worse than originally thought.
The machine is now considered to be worthless and the recoverable amount of the factory as a cash-generating unit is estimated to be $950,000.
At 1 July 20X7, the cash-generating unit comprises the following assets:
| $’000 | ||
|---|---|---|
| Building | 500 | |
| Plant and equipment (including the damaged machine at a carrying amount of $35,000) | 335 | |
| Goodwill | 85 | |
| Net current assets (at recoverable amount) | 250 | |
| Net current assets (at recoverable amount) | 1,170 |
In accordance with IAS 36, what will be the carrying amount of Aphrodite Co’s plant and equipment when the
impairment loss has been allocated to the cash-generating unit?
A $262,500
B $300,000
C $237,288
D $280,838