Calculate the total impairment loss associated with Syarikat Alfa’s machine at 1 October 2019
Impairment is defined as a reduction in the value of a company asset, whether fixed or intangible which decline the asset's quality, quantity, or market value.
(a) The carrying amount of a machinery is RM525,000. This consists of
(b) Syarikat Alfa 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 2016 for RM80,000 which had a useful life of ten years and is
A fire at the factory on 1 October 2019 has damaged the machine leaving it with a lower operating capacity. The accountant considers that Syarikat Alfa will need to recognise an impairment loss in relation to this damage. The accountant has ascertained the following information at 1 October 2019:
(i)
The carrying amount of the machine is RM60,750.
(ii)
An equivalent new machine would cost RM90,000.
(iii)
The machine could be sold in its current condition for a gross amount of RM45,000. Dismantling costs would amount to RM2,000.
(iv)
In its current condition, the machine could operate for three more years which gives it a value in use of RM38,685.
Calculate the total impairment loss associated with Syarikat Alfa’s machine at 1 October 2019.
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