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CA Intermediate · Advanced Accounting · AS 28 Impairment of Assets

Kaveri Textiles Ltd. owns a machine with a carrying amount of Rs 18,00,000. Its net selling price is Rs 14,00,000 and its value in use is Rs 16,50,000. Under AS 28, what is the impairment loss to be recognised?

The impairment loss is Rs 1,50,000. Recoverable amount under AS 28 is the higher of net selling price and value in use, which is Rs 16,50,000. Deducting this from the carrying amount of Rs 18,00,000 gives the loss to be charged to the statement of profit and loss.

  1. ARs 1,50,000Correct
  2. BRs 4,00,000
  3. CRs 2,50,000
  4. DNil

Explanation

Recoverable amount is the higher of net selling price (14,00,000) and value in use (16,50,000), i.e. 16,50,000. Impairment loss = 18,00,000 - 16,50,000 = 1,50,000. Using net selling price gives 4,00,000, which wrongly takes the lower figure.

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