Chloe Ltd purchased equipment on 1 April 20X2 for GHS 100,000. The equipment was depreciated using the reducing balance method at 25% per annum. Chloe Ltd prepares accounts to 31 March annually. Depreciation was charged up to and including 31 March 20X4. At that date, the recoverable amount of the equipment was GHS 42,000. According to IAS 36 Impairment of Assets, what was the impairment loss on this equipment calculated on 31 March 20X4?
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.
- Chloe Ltd purchased equipment on 1 April 20X2 for GHS 100,000. The equipment was
depreciated using thereducing balance method at 25% per annum. Chloe Ltd prepares accounts to 31 March annually.
Depreciation was charged up to and including 31 March 20X4. At that date, the recoverable amount of the equipment was GHS 42,000.
According to IAS 36 Impairment of Assets, what was the impairment loss on this equipment calculated on 31 March 20X4?
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