question archive A Comp X Limited operates a factory which makes computer chips for mobile phones
A Comp X Limited operates a factory which makes computer chips for mobile phones
Subject:AccountingPrice: Bought3
A Comp X Limited operates a factory which makes computer chips for mobile phones. It purchased a machine on 1 July 2017 for R80 000 which had a useful life of ten years and is depreciated on the straight-line basis. The machine was revalued to R81 000 on 1 July 2020 and there was no change to its useful life at that date. A fire at the factory on 1 October 2020 damaged the machine leaving it with a lower operating capacity The accountant considers that comp X Limited will need to recognise an impairment loss in relation to this damage. The accountant has ascertained the following information on 1 October 2020: (1) The carrying amount of the machine is R60 750. (2) An equivalent new machine would cost R90 000. (3) The machine could be sold in its current condition for a gross amount of R45 000. Dismantling costs total an amount of R2 000 (4) In its current condition, the machine could operate for three more years which gives it a value in use figure of R38 685. Year end is 31 December
