Non - current assets

Question 1

Double entry for impairment?

Answer 1

Dr Impairment expense
Cr asset

Question 2

How do you work out the charge for impairment?

Answer 2

CA
less recoverable amount
= impairment

After impairment depreciation should be calculated based on new value and remaining useful life of asset

Question 3

How do you find the recoverable amount?

Answer 3

Higher of fair value less costs to sell and value in use

Question 4

What are the steps for dealing with disposals?

Answer 4

1. Remove cost of asset: Dr disposal a/c Cr NCA
2. Remove accumulated depreciation: Dr Acc. Depn. Cr disposal a/c
3. Account for sales proceeds: Dr cash cCr disposal

A gain in disposalis shown as Sundry income and a loss an as expense

Question 5

What is double entry for part exchange allowance

Answer 5

Dr new asset cost
Cr disposal a/c

Question 6

What is double entry for settlement discount?

Answer 6

Dr cash (by cash received)
Cr TR (by total amount)
Dr sales (by difference)

because your sales (income) has reduced because of the discount being taken