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CA Intermediate · Advanced Accounting · AS 28 Impairment of Assets

Veda Textiles Ltd. owns a weaving machine with a carrying amount of ₹48,00,000 at the balance sheet date. Its net selling price is ₹41,00,000 and its value in use is ₹44,50,000. As per AS 28, the impairment loss to be recognised is:

The impairment loss is ₹3,50,000. Recoverable amount under AS 28 is the higher of net selling price and value in use, which is ₹44,50,000. Deducting this from the carrying amount of ₹48,00,000 gives the loss to be charged to profit and loss.

  1. A₹3,50,000Correct
  2. B₹7,00,000
  3. C₹10,50,000
  4. DNil

Explanation

Recoverable amount is the higher of net selling price (₹41,00,000) and value in use (₹44,50,000), i.e. ₹44,50,000. Impairment loss = 48,00,000 − 44,50,000 = ₹3,50,000. The ₹7,00,000 option wrongly uses net selling price as recoverable amount.

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