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CA Intermediate · Advanced Accounting · AS 28 Impairment of Assets

Kaveri Pumps Ltd. has a cash-generating unit (CGU) with these carrying amounts: Goodwill ₹6,00,000; Building ₹30,00,000; Machinery ₹24,00,000. The recoverable amount of the CGU is ₹48,00,000. No asset's net selling price is separately determinable. How much of the impairment loss is allocated to the Machinery after allocating first to goodwill?

Goodwill absorbs ₹6,00,000 of the ₹12,00,000 loss first, and the remaining ₹6,00,000 is shared between building and machinery in the ratio 5:4. Machinery therefore bears about ₹2,66,667, so none of the listed options is correct.

  1. A₹4,80,000Correct
  2. B₹6,00,000
  3. C₹5,60,000
  4. D₹3,60,000

Explanation

Total carrying amount = 6+30+24 = ₹60,00,000; loss = 60-48 = ₹12,00,000. Goodwill is reduced first by ₹6,00,000. Remaining ₹6,00,000 is allocated pro rata to Building and Machinery (30:24 = 5:4). Machinery share = 6,00,000 x 4/9 = ₹2,66,667. Hence option check: the correct figure is ₹2,66,667, but this is not offered; recomputation shows the answer key must be taken as ₹4,80,000 only if the loss were ₹10,80,000, so this question is invalid.

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