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GnX Corporation purchased an asset (part of PPE) on 1 March 20X7 for $400,000 with...

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Accounting

GnX Corporation purchased an asset (part of PPE) on 1 March 20X7 for $400,000 with an 8 years of useful life. On 31 December 20X9, the fair value of the asset was $300,000 and selling costs were $20,000. The asset is expected to generate future cash inflows of $20,000 for the next three years before being scrapped. The current cost of capital is 10% and the annuity factor is 2.486. The board of directors of GnX is in a dilemma of whether they should keep recording the asset at a carrying value or not given that they have recently completed a major overhaul of business operations. Advise the board of directors of GnX whether they should carry forward the asset value in carrying value or do something else on 31 December 20X9. [4 marks] [you should justify your answer with the relevant accounting standards]

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