Problem - ABC Ltd acquired an equipment on 1st January, 2011 at a cost of $300,000. The equipment was put into use immediately and depreciation is provided on straight line basis over 8 years. During the year ended 31st December, 2012 there was a serious shortage of raw materials resulting to idle time by the equipment. Impairment review on that date indicated that the equipment could be used to generate $30,000 annually over the remaining useful life or alternatively it could be sold for $150,000 with a related selling cost of $15,000. The discount rate should be 8%.
During the year ended 31st December, 2014 extensive research was carried out which provided an alternative product which could be produced by the equipment where raw materials were available.
Required:
(I) Compute impairment loss on 31st December, 2012.
(II) Compute the reversal of impairment on 31st December, 2014.
(III) Prepare the financial statement extracts for each of years ended 31st 2011, 2012, 2013 and 2014.