Parkes Limited recognised an impairment loss of $20 000 against a cash-generating unit containing the following assets: buildings $50 000; roads $110 000; equipment $40 000. The net carrying amount of the roads after allocation of the impairment loss is:

Question

Quizplus · Accepted Answer

The impairment loss is allocated on a pro-rata basis according to the carrying amount of each asset within the cash-generating unit. The total carrying amount before impairment is $200,000 ($50,000 + $110,000 + $40,000). The roads account for 55% of the total ($110,000 / $200,000). Therefore, the impairment loss allocated to the roads is 55% of $20,000, which is $11,000. The net carrying amount of the roads after the impairment loss is $110,000 - $11,000 = $99,000.

Parkes Limited Recognised an Impairment Loss of $20 000 Against