Constructor Limited estimated an impairment loss of $500 against its single cash-generating unit. The company had the following assets: headquarters building $1000; construction plant $600; equipment $400. The net carrying amount of the equipment after allocation of the impairment loss is:

Question

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When an impairment loss is recognized, it must first be allocated to reduce the carrying value of any goodwill allocated to the cash-generating unit and then allocated to the other assets of the unit pro rata on the basis of the carrying amount of each asset in the unit. In this case, the equipment has a carrying amount of $400, which is 40% of the total carrying amount of all assets in the unit. Therefore, 40% of the $500 impairment loss, or $200, must be allocated to the equipment. The net carrying amount of the equipment after the impairment loss is $400 - $200 = $200.

Constructor Limited Estimated an Impairment Loss of $500 Against Its