i. Insight Corp. acquired an item of plant at a cost of $800,000 on 1 April 20X0 that is used to produce and package pharmaceutical pills. The plant had an estimated residual value of $50,000 and an estimated life of five years, neither of which has changed. Insight Corp. uses straight-line depreciation. On 31 March 20X2, Insight Corp. was informed by a major customer (who buys products produced by the plant) that it would no longer be placing orders with Insight Corp.. Even before this information was known, Insight Corp. had been having difficulty finding work for this plant. It now estimates that net cash inflows earned from the plant for the next three years will be: В. $'000 Year ended: 31 March 20X3 220 31 March 20X4 180 31 March 20X5 170 On 31 March 20X5, the plant is still expected to be sold for its estimated realisable value. Insight Corp. has confirmed that there is no market in which to sell the plant at 31 March 20X2. Insight Corp.'s cost of capital is 10% and the following values should be used Value of $1 at: $ End of year 1 0.91 End of year 2 End of year 3 0.83 0.75 ii. Insight Corp. owned a 100% subsidiary, Tilda, that is treated as a cash generating unit. On 31 March 20X2, there was an industrial accident (a gas explosion) that caused damage to some The assets of Tilda immediately before the accident were: Tilda's plant. Goodwill 1,800 Patent 1,200 Factory building 4,000 Plant 3,500 Receivables and cash 1,500 12,000 As a result of the accident, the recoverable amount of Tilda is $6.7 million. The explosion destroyed (to the point of no further use) an item of plant that had a carrying amount of $500,000. Tilda has an open offer from a competitor of $1 million for its patent. The receivables and cash are already stated at their fair values less costs to sell (net realisable values).
i. Insight Corp. acquired an item of plant at a cost of $800,000 on 1 April 20X0 that is used to produce and package pharmaceutical pills. The plant had an estimated residual value of $50,000 and an estimated life of five years, neither of which has changed. Insight Corp. uses straight-line depreciation. On 31 March 20X2, Insight Corp. was informed by a major customer (who buys products produced by the plant) that it would no longer be placing orders with Insight Corp.. Even before this information was known, Insight Corp. had been having difficulty finding work for this plant. It now estimates that net cash inflows earned from the plant for the next three years will be: В. $'000 Year ended: 31 March 20X3 220 31 March 20X4 180 31 March 20X5 170 On 31 March 20X5, the plant is still expected to be sold for its estimated realisable value. Insight Corp. has confirmed that there is no market in which to sell the plant at 31 March 20X2. Insight Corp.'s cost of capital is 10% and the following values should be used Value of $1 at: $ End of year 1 0.91 End of year 2 End of year 3 0.83 0.75 ii. Insight Corp. owned a 100% subsidiary, Tilda, that is treated as a cash generating unit. On 31 March 20X2, there was an industrial accident (a gas explosion) that caused damage to some The assets of Tilda immediately before the accident were: Tilda's plant. Goodwill 1,800 Patent 1,200 Factory building 4,000 Plant 3,500 Receivables and cash 1,500 12,000 As a result of the accident, the recoverable amount of Tilda is $6.7 million. The explosion destroyed (to the point of no further use) an item of plant that had a carrying amount of $500,000. Tilda has an open offer from a competitor of $1 million for its patent. The receivables and cash are already stated at their fair values less costs to sell (net realisable values).
Chapter11: Long-term Assets
Section: Chapter Questions
Problem 13PA: Colquhoun International purchases a warehouse for $300,000. The best estimate of the salvage value...
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Transcribed Image Text:i. Insight Corp. acquired an item of plant at a cost of $800,000 on 1 April 20X0 that is used to produce
and package pharmaceutical pills. The plant had an estimated residual value of $50,000 and an
estimated life of five years, neither of which has changed. Insight Corp. uses straight-line depreciation.
On 31 March 20X2, Insight Corp. was informed by a major customer (who buys products produced by
the plant) that it would no longer be placing orders with Insight Corp.. Even before this information was
known, Insight Corp. had been having difficulty finding work for this plant. It now estimates that net
cash inflows earned from the plant for the next three years will be:
B.
Year ended:
000.$
31 March 20X3
220
31 March 20X4
180
31 March 20X5
170
On 31 March 20X5, the plant is still expected to be sold for its estimated realisable value. Insight Corp.
has confirmed that there is no market in which to sell the plant at 31 March 20X2. Insight Corp.'s cost of
capital is 10% and the following values should be used
Value of $1 at:
End of year 1
End of year 2
End of year 3
$
0.91
0.83
0.75
ii. Insight Corp. owned a 100% subsidiary, Tilda, that is treated as a cash generating unit. On 31 March
accident (a gas explosion) that
there was an
damage to some of Tilda's plant.
The assets of Tilda immediately before the accident were:
Goodwill
1,800
Patent
1,200
Factory building
4,000
Plant
3,500
Receivables and cash
1,500
12,000
As a result of the accident, the recoverable amount of Tilda is $6.7 million.
The explosion destroyed (to the point of no further use) an item of plant that had a carrying amount of
$500,000.
Tilda has an open offer from a competitor of $1 million for its patent. The receivables and cash are already
stated at their fair values less costs to sell (net realisable values).
Transcribed Image Text:Required
Calculate the carrying amounts of the assets in (i) and (ii) above at 31 March 20X2 after applying any
impairment losses.
Calculations should be to the nearest $1,000.
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