Reference no: EM132756739

Question - Telepath acquired an item of plant at a cost of $800,000 on 1 April 20X0 that is used to produce and package pharmaceutical pills. The plant had an estimated residual value of $50,000 and an estimated life of five years, neither of which has changed. Telepath uses straight-line depreciation.

On 31 March 20X2, Telepath was informed by a major customer (who buys products produced by the plant) that it would no longer be placing orders with Telepath. Even before this information was known, Telepath had been having difficulty finding work for this plant. It now estimates that net cash inflows earned from the plant for the next three years will be:

$'000

Year ended: 31 March 20X3 220

31 March 20X4 180

31 March 20X5 170

Telepath has confirmed that there is no market in which to sell the plant at 31 March 20X2.

Telepath's cost of capital is 10%.

Required - Calculate the carrying amount of the asset above at 31 March 20X2, after applying any impairment losses. Calculations should be to the nearest $1,000.