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Question B1 Mediterranean Plc has an asset which cost 400,000 on 1 January 2020 is...

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Accounting

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Question B1 Mediterranean Plc has an asset which cost 400,000 on 1 January 2020 is being depreciated on the straight-line method over 5 years with an estimated salvage value of 80,000. Mediterranean Ploc has conducted an impairment review on 31 December 2021 and makes the following estimates regarding the asset cash flow over the rest of its useful life: Year 2022 2023 2024 Inflows '000 90 70 120 Outflows '000 10 10 10 The year 2024 includes the cash flow of the estimated salvage value of 80,000. However, the asset could be sold on 31 December 2021 for 220,000. Disposal costs would be 12,000. Required: a. Calculate the asset's value in use, assuming that all cash flows occur at the end of the ear concerned using a discount rate of 8%. (Present value table is provided at the end of the exam paper). (5 marks) b. Determine the asset's recoverable amount. (5 marks) C. Calculate the amount of the impairment loss that has occurred and explain how this should be accounted for. (10 marks) Calculate the depreciation amount that should be charged in relation to the asset for each of the remaining years of its useful life. (5 marks) d. (Total: 25 marks)

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