Advanced AccountingQuestion 5269 of 305
All Questions

3. What will be the impact of test of impairment on Profit & Loss Account of the company?

Options

AImpairment loss of ` 4,00,000 to be debited to Profit & Loss A/c.
BImpairment loss of ` 4,25,000 to be debited to Profit & Loss A/c.
CImpairment loss of ` 6,25,000 to be debited to Profit & Loss A/c.
DImpairment loss of ` 15,25,000 to be debited to Profit & Loss A/c.
For any discrepancies in this question, email contact@cadada.in

Correct Answer

✅ Option C — Impairment loss of ` 6,25,000 to be debited to Profit & Loss A/c.

All Options:

  • AImpairment loss of ` 4,00,000 to be debited to Profit & Loss A/c.
  • BImpairment loss of ` 4,25,000 to be debited to Profit & Loss A/c.
  • CImpairment loss of ` 6,25,000 to be debited to Profit & Loss A/c. ✓
  • DImpairment loss of ` 15,25,000 to be debited to Profit & Loss A/c.

Ad

Detailed Solution & Explanation

To find the impact of the test of impairment on the Profit & Loss Account as on 31st March, 2023:
1. Carrying amount of the Machine on 1st April, 2021 (after refund) was ‘ 44,00,000\displaystyle `\,44,00,000.
2. Depreciation charged for 2021-22 and 2022-23 (at ‘ 4,87,500\displaystyle `\,4,87,500 per year):
Accumulated Depreciation for 2 years=‘ 4,87,500×2=‘ 9,75,000\text{Accumulated Depreciation for 2 years} = `\,4,87,500 \times 2 = `\,9,75,0003. Carrying amount on 31st March, 2023 before impairment testing:
Carrying Amount=‘ 44,00,000−‘ 9,75,000=‘ 34,25,000\text{Carrying Amount} = `\,44,00,000 - `\,9,75,000 = `\,34,25,0004. Recoverable amount is ascertained to be ‘ 28,00,000\displaystyle `\,28,00,000.
5. Under AS 28, Impairment Loss is calculated as:
Impairment Loss=Carrying Amount−Recoverable Amount=‘ 34,25,000−‘ 28,00,000=‘ 6,25,000\text{Impairment Loss} = \text{Carrying Amount} - \text{Recoverable Amount} = `\,34,25,000 - `\,28,00,000 = `\,6,25,000This impairment loss of ‘ 6,25,000\displaystyle `\,6,25,000 must be debited to the Profit & Loss Account.
Hence, **Option C** is the correct answer.

More Questions from Advanced Accounting

3x−2:5x+6\displaystyle 3x-2:5x+6 the duplicate ratio of 2:3\displaystyle 2:3 then find the value x\displaystyle x.

If the ratio of two numbers is 7:11\displaystyle 7:11. If 7\displaystyle 7 is added to each number then the new ratio will be 2:3\displaystyle 2:3 then the numbers are.

If x:y=z:7=4:11\displaystyle x:y=z:7=4:11 then x+y+zz\displaystyle \frac{x+y+z}{z} is

The ratio of two numbers are 3:4\displaystyle 3:4. The difference of their squares is 28\displaystyle 28 greater is:

The price of scooter and moped are in the ratio 7:9\displaystyle 7:9. The price of moped is ₹1,600\displaystyle ₹1,600 more than that of scooter. Then the price of moped is:

If A:B=3:7\displaystyle A:B=3:7, then 3a+2b:4a+5b=?\displaystyle 3a+2b:4a+5b=?

Ready to Master Advanced Accounting?

Practice all 305 questions with instant feedback, earn XP, track your streaks, and ace your CA Foundation exam.

Start Practicing — It's Free