Alayna Ltd bought a machine on 1 January 20X2 for $70,000. The useful life of this machine was assessed as 10 years and it was depreciated on a straight-line basis. On 31 December 20X3 the machine was revalued to a fair value of $80,000 with no change to its remaining useful life. On 31 December 20X6 the machine was identified as impaired and revalued to $20,000. Alayna does not make a transfer between the revaluation surplus and retained earnings each year as a result of the revaluation. Required: According to HKAS 36 ‘Impairment of Assets’ what amount will be included in the statement of profit or loss of Alayna for the year ended 31 December 20X6 in respect of this impairment loss? A. $nil B. $6,000 C. $30,000 D. $24,000
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Alayna Ltd bought a machine on 1 January 20X2 for $70,000. The useful life of this machine was assessed as 10 years and it was
On 31 December 20X3 the machine was revalued to a fair value of $80,000 with no change to its remaining useful life. On 31 December 20X6 the machine was identified as impaired and revalued to $20,000.
Alayna does not make a transfer between the revaluation surplus and
Required: According to HKAS 36 ‘Impairment of Assets’ what amount will be included in the statement of profit or loss of Alayna for the year ended 31 December 20X6 in respect of this impairment loss?
| A. |
$nil |
|
| B. |
$6,000 |
|
| C. |
$30,000 |
|
| D. |
$24,000 |
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