QUESTION FOUR

ABP Ltd. hires out power boats to tourists on Slipway – Mbudya route on hourly rates.

The financial statements for the year ended 31 st December, 2023 (draft) includes the
following power boat:

TZS.'000' TZS.'000'
Cost 20,000
Acc. Depr.b /f 5,000
Charge for the year 5,000 (10,000)
Carrying amount 10,000

Depreciation is charged at 25% straight line

In December, 2023 the only tourism company bringing tourists to Mbudya Island
withdraws from the route and as a result the tourist market on the route faces significant
uncertainity and an impairment review is carried out by ABP Ltd.

The following projections have been made by the directors in respect of the power
boats.

 Expected revenue of TZS.4,800,000 per annum in 2024 and 2025.

 The power boat could be sold for TZS.5,600,000 (costs to sell
TZS.500,000) immediately.
 The costs of borrowing is 10% hence discount factors of 0.909 and
0.826 for year 1 and year 2 respectively.
REQUIRED:
a) Calculate impairment loss in respect of power boat for the year ended 31 st
December, 2023. (11 marks)

The amount at which the power boat will be reflected in the statement
of financial position for the year ended 31 st December, 2023, 31st
December, 2024 and 31st December, 2025.
(9 marks)
(Total 20 marks)

Uhasibu Ltd has been operating in Keko Industrial Zone since 2016 and now the
owners has decided to relocate Uhasibu Ltd to Prime economic Zone at Ubungo. You
are an accountant of Uhasibu Ltd and below is information provided to you relating to
the carrying amount of the assets comprising the cash generating units (CGU) of
Uhasibu Ltd as at 30 June 2023.
 Particulars CGU NO 1 CGU NO2
TZS"000" TZS"000"
Goodwill - 25,000
Tangible fixed Assets 26,000 107,000
Inventories 22,000 23,000

The Financial planning analyst of Uhasibu ltd. has prepared the following cash
forecasts relating to the business operations of the two cash generating units.

Period CGU NO 1 Cash flow CGU NO2 Cash flow

TZS"000" TZS"000"
1 8,000 20,000
2 6,000 22,000
3 9,000 27,000
4 10,000 24,000
5 11,000 25,000
6 12,000 30,000
Total 56,000 148,000

Additional Information;

The Net realizable value of the assets of cash generating unit are TZS 50 Million and
70 Million for No1&2 respectively.
The discounting rate appropriate to the activities of the cash generating unit No1 is
10% and that of the cash generating unit No2 is 12%

Required:
a) The recoverable amount of cash generating unit No1 and cash generating unit No2.
(8 marks)
b) The impairment loss, if any for cash generating unit No1&2. (4 marks)

c) Allocate the impairment loss, if any between the assets of cash generating unit
No1&2. (8 marks)
(Total 20 Marks)