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CA Intermediate · Advanced Accounting · AS 28 Impairment of Assets

Sundaram Textiles Ltd. has a machine with carrying amount of Rs 48 lakh at the balance sheet date. Its net selling price is Rs 40 lakh and its value in use is Rs 44 lakh. What is the impairment loss to be recognised under AS 28?

The impairment loss is Rs 4 lakh. AS 28 measures recoverable amount as the higher of net selling price and value in use, which is Rs 44 lakh here. Carrying amount of Rs 48 lakh exceeds this by Rs 4 lakh, which is charged to profit and loss.

  1. ARs 4 lakhCorrect
  2. BRs 8 lakh
  3. CRs 0
  4. DRs 12 lakh

Explanation

Recoverable amount is the higher of net selling price (40) and value in use (44), i.e. Rs 44 lakh. Impairment loss = 48 - 44 = Rs 4 lakh. Rs 8 lakh wrongly uses net selling price, the lower figure.

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