Question
In: Accounting
(b) On 1 July 2018, Maxwell Chemical Ltd acquired a plant at a cost of $1,000,000....
(b) On 1 July 2018, Maxwell Chemical Ltd acquired a plant at a cost of $1,000,000. Maxwell depreciated the assets on a straight line basis. As at 30 June 2020, the machinery had accumulated depreciation of $200,000 and an expected remaining useful life of four years. On 30 June 2020, Maxwell Chemical Ltd conducted an impairment test on asset. It was assessed that the plant could be sold to other entities for $600,000 with costs of disposal of $25,000. The management expect to use the plant for another four years and it is expected that net cash flow to be generated by the plant would be $195,000 over each of the next four years. The rate of return by the market on this plant is 8% as at 30 June 2020.
Note: The present value of an annuity of $1 for four years discounted at 8 per cent is $3.3121
Required: (a) Determine whether the plant is impaired. If so, provide appropriate journal entry at 30 June 2020.
(b) Provide the journal entry to account for the depreciation in 2021.
Solutions
ekkarill92 answered 1 year agoRelated Solutions
On 1 July 2018, Maxwell Chemical Ltd acquired a plant at a cost of $1,000,000. Maxwell...
On 1 July 2018, Maxwell Chemical Ltd acquired a plant at a cost
of $1,000,000. Maxwell depreciated the assets on a straight line
basis. As at 30 June 2020, the machinery had accumulated
depreciation of $200,000 and an expected remaining useful life of
four years. On 30 June 2020, Maxwell Chemical Ltd conducted an
impairment test on asset. It was assessed that the plant could be
sold to other entities for $600,000 with costs of disposal of
$25,000. The management...
On 1 July 2018 Fraser Ltd acquired an item of equipment with an acquisition cost of...
On 1 July 2018 Fraser Ltd acquired an item of equipment with an
acquisition cost of $400,000. The equipment can be used for 8
years. On 30 June 2019, the end of financial year, the fair value
of the equipment was $357,000. The equipment was sold for $330,000
on 1 January 2020. Non-current asset is depreciated evenly over the
useful life and has no residual value. The company uses the
revaluation model to record non-current asset. The income tax rate...
Salidou Ltd acquired all the shares of Chocolat Ltd on 1 July 2018. All the net...
Salidou Ltd acquired all the shares of Chocolat Ltd on 1 July
2018. All the net assets of Chocolat Ltd were at fair value at the
date of acquisition except for an equipment, which was below its
fair value. The remaining useful life of the equipment is 5 years.
At 30 June 2023, depreciation expense will need to be debited.
True
False
On 1 July 2018, Parent Ltd acquired all the shares of Son Ltd, on a cum-div....
On 1 July 2018, Parent Ltd acquired all the shares of Son Ltd,
on a cum-div. basis, for $2,057,000. At this date, the equity of
Son Ltd consisted of:
Share capital – 500 000 shares $ 1,000,000
Retained earnings 500,000
Son Ltd also reported a dividend payable of $100,000 and a
recorded goodwill of $50, 000 at the acquisition date. The dividend
payable was subsequently paid in September 2018.
At the acquisition date, all the identifiable assets and
liabilities of...
On 1 July 2018, Parent Ltd acquired all the shares of Son Ltd, on a cum-div....
On 1 July 2018, Parent Ltd acquired all the shares of Son Ltd,
on a cum-div. basis, for $2,057,000. At this date, the equity of
Son Ltd consisted of:
Share capital – 500 000 shares: $ 1,000,000
Retained earnings: 500,000
Son Ltd also reported a dividend payable of $100,000 and a
recorded goodwill of $50, 000 at the acquisition date. The dividend
payable was subsequently paid in September 2018.
At the acquisition date, all the identifiable assets and
liabilities of...
Juan Ltd acquired 80 percent share capital of Beach Ltd. On 1 July 2018 for a...
Juan Ltd acquired 80 percent share capital of Beach Ltd. On 1
July 2018 for a cost of $500,000. As at the date of acquisition,
all assets and liabilities of Beach Ltd fairly valued except a land
that has a carrying value $50,000 less than the fair value. The
recorded balance of equity of Beach Ltd as at 1 July 2018 were as:
Share capital $350,000 Retained earnings $100,000 Total $450,000
Additional information: ? The management of Juan Ltd values...
Gunna Ltd acquired a printing machine on 1 July 2018 for $100,000. It is expected to...
Gunna Ltd acquired a printing machine on 1 July 2018 for
$100,000. It is expected to have a useful life of 5 years, with the
benefits being derived on a straight- line basis. The residual is
expected to be $nil. On 1 July 2019 the machine is deemed to have a
fair value of $75,000 and a revaluation is undertaken in accordance
with Gunnamatta Ltd’s policy of measuring property, plant and
equipment at fair value. The asset is sold for...
On 1 July 2018, Sunflower Ltd acquired 90% of the share capital to gain control of...
On 1 July 2018, Sunflower Ltd acquired 90% of the share capital
to gain control of Palm Ltd. The following intra-group transactions
occurred during the year ending 30 June 2019. (i) During the 2018 -
2019 period, Sunflower Ltd sold inventory to Palm Ltd for
$1600,000. Sunflower Ltd purchased this inventory at $1000,000. By
30 June 2019, Palm Ltd has sold 70% of that inventory to third
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(ii) Palm Ltd declared a final dividend of $1300, 000 from
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ABC Ltd acquired a machine for $750 000 on 1 July 2018. The machine had a...
ABC Ltd acquired a machine for $750 000 on 1 July 2018. The
machine had a useful life of five years and was depreciated on a
straight-line basis with no disposal value. ABC Ltd adopts the cost
model for accounting for assets in this class. ABC Ltd makes the
following estimates of the value of the machine: Date Net selling
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30 June 2020 $460 000...
ABC Ltd acquired a machine for $750 000 on 1 July 2018. The machine had a...
ABC Ltd acquired a machine for $750 000 on 1 July 2018. The
machine had a useful life of five years and was depreciated on a
straight-line basis with no disposal value. ABC Ltd adopts the cost
model for accounting for assets in this class. ABC Ltd makes the
following estimates of the value of the machine:
Date
Net selling price
Value in use
Fair Value
30 June 2019
$550 000
520 000
590 000
30 June 2020
$460 000...
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