Question

Review each of the following independent financial scenarios and discuss the appropriate accounting treatment. Also, calculate an amount(s) for each one. Your answer should be as concise as possible.

1. Machine “S” met all conditions for held-for-sale at the year-end. The machine had a net book value of $120,785 and fair value of $57,780. The company had spent $2,050 to dismantle the machine and prepare it for sale. When the company prepares its December 31 statement of financial position, how should this item be reported ? Be specific as to classification and amount.

Answer 1

Carrying amount =120785

Fair value less cost to sell = 57780-2050 = 55730.

Impairment loss = 120785 - 55730 = 65055.

The asset shall be shown on the assets side of the financial statements under current assets further under other current assets.

The amount that shall be shown for the machine would be $55730.It is because according to the standards the amount that is shown is fair value less cost to sell.

The impairment loss shall be shown in the profit and loss statement.

Hope it helps.

All the best ?