Presented below is information related to the equipment owned by Silver Company

Question

Presented below is information related to the equipment owned by Silver Company at December 31, 2015:

Cost (residual value $0)                     $4,000,000

Accumulated depreciation to date        800,000

Value-in-use                                         2,500,000

Fair value less cost of disposal          2,800,000

Assume that Silver will continue to use this asset in the future. As of December 31, 2015, the equipment has a remaining useful life of 8 years. Silver uses straight-line depreciation. Based on International Financial Reporting Standard, the amount of depreciation expense that Silver should recognize on December 31, 2016 would be:  

$400,000.

$350,000.

$312,500.

$200,000

Assume that Silver will continue to use this asset in the future. As of December 31, 2015, the equipment has a remaining useful life of 8 years. Silver uses straight-line depreciation. Based on International Financial Reporting Standard, the amount of impairment loss to be recognized by Silver on December 31, 2015 will be:

$700,000.

$500,000.

$400,000.

$0.

Explanation / Answer

Ans) Depriciation 400 and Impairement Loss 400

Calculation of Deprociation cost-residual value/life 4000-800 WDV on 31-dec-2015 3200 3200/8 Depriciation 400 Impairement Loss WDV of Assests 3200 3200 Higher of Value in use orfair value. 2500 or 2800 2800 2800 Impairement Loss 3200-2800 Impairement Loss 400

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