A non-current asset (which has never been revalued) has acarrying amount of £100,000. The asset is..

A non-current asset (which has never been revalued) has acarrying amount of £100,000. The asset is being depreciated on astraight-line basis, with a remaining useful life of three yearsand a residual value of £10,000. The asset is expected to generatenet cash inflows of £20,000 per year for the next three years andthen to be sold for £10,000. Disposal costs are expected to benegligible. At present, the asset could be sold for £50,000.Disposal costs would be £2,000.(i) Assuming a discount rate of 10% and that all cash flowsoccur at the end of the year concerned, determine the asset’s valuein use.
(ii) Perform an impairment test for the above non-currentasset explaining the appropriate procedure, calculate anyimpairment loss arising and explain how this should be accountedfor (double entry).(iii) Calculate the amount of depreciation that should becharged in relation to the asset for each of the next three years,assuming that the straight-line method will continue to be used andthe residual value remains unchanged.

Thanks for installing the Bottom of every post plugin by Corey Salzano. Contact me if you need custom WordPress plugins or website design.