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On 30 September 2017 an impairment review was carried out on a machine
On 30 September 2017 an impairment review was carried out on a machine . The following amounts were established in respect of the machine:
$
Carrying amount 850,000
Value in use 760,000
Fair value 850,000
Costs of disposal 30,000
The recoverable amount of the machine is?
Select one:
a. $850,000
b. $820,000
c. $760,000
d. $790,000
Expert Solution
Computation of Recoverable Amount:
Recoverable Amount = Higher of value in use or Net selling price
Here,
Value in use = 760,000
Net selling price = Fair value - Cost of disposal = 850,000-30,000 = 820,000
So,
Recoverable amount is higher of value in use or net selling price = 820,000
So, the correct option is B "$820,000".
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