# Tutorial_2_ans.xlsx - Impairment of Asset 1(a...

• No School
• AA 1
• 4

This preview shows page 1 - 2 out of 4 pages.

Impairment of Asset 1. (a) Building @Carrying Amount = RM10 mil x 40/50 = RM8 mil 1. Fair value (FV) = RM6 mil *take the highest number 2. Value in use (VIU) = RM4.2 mil Recoverable amount (RA) = RM6 mil CA > RA = Impairment Loss Impairment Loss = RM8 mil- RM6 mil = RM2 mil In my opinion, the asset is impaired because the carrying amount > recoverable amount (CA > RA) and it is caused by ecological changes, where the area is prone to floods. (b) Fair value (FV) = RM6 mil FV = RM6 mil VIU VIU = RM4.2 mil x 1/(1+0.03)^10) A = RM 4.62 mil = RM4.08 mil The drop in market interest rate will decrease the present value (VIU) of the rental. ( c ) The government enlarged the area closed by the river and bulit embankments to stop flood will increase the FV of the rental of the building. market interest rate - 10% market interest rate - 3% FV = RM6000000 P = RM429490 (1-(1+0.03)^36 / 0.03) VIU = RM4200000 P = RM9376734 RM4200000 = P ( 1-(1+0.1)^40 / 0.1 CA = RM 10000000-(RM200000*14) P = RM429490 CA = RM7200000 When the interest rate is low, the assets RA will be large. However, the RA is limited to RM 7200000 because RA cannot exceed CA Market interest rate - 10% Market interest rate - 3% = ( A x 1/(1+0.1)) = RM4.2 mil

Subscribe to view the full document.

• Fall '19
• Depreciation, 1971, Generally Accepted Accounting Principles, RM postcode area

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern

Ask Expert Tutors You can ask 0 bonus questions You can ask 0 questions (0 expire soon) You can ask 0 questions (will expire )
Answers in as fast as 15 minutes