On August 1, 2011, Wei Inc.purchased a license with a cost of HK$8,424,000 and a useful life of 10 years.At December 31, 2013, when the carrying value of the asset was HK$6,388,200, the company determined that impairment indicators were present.The fair less costs to sell the license was estimated to be HK$5,909,120.The asset's value-in-use is estimated to be HK$6,084,000.Wei's 2013 income statement will report Loss on Impairment of

Question

Quizplus · Accepted Answer

The loss on impairment is calculated as the difference between the carrying value of the asset and the higher of its fair value less costs to sell and its value-in-use. In this case, the carrying value of the license is HK$6,388,200. The higher of its fair value less costs to sell (HK$5,909,120) and its value-in-use (HK$6,084,000) is its value-in-use. Therefore, the loss on impairment is HK$6,388,200 - HK$6,084,000 = HK$304,200.