Question

Beast Ltd has identified recoverable amount on one of its CGUs to be $470,000. Land has a fair value (less costs to sell) of $204,000. All assets are measured using the cost model.

• The CGU consists of the following assets (stated at current carrying amounts):

• Cash 22,000

• Accounts receivable 55,000

Allowance Bad debts (15,000)

• Factory 195,000 Accumulated dep. (45,000)

• Equipment 90,000 Accumulated dep. (10,000)

• Land 210,000 • Goodwill 20,000

Required: Calculate any impairment loss and record the necessary journal entry for Beast Ltd.

Answer 1

Answer
Carrying Amount of CGU		$ 5,22,000.00
Identified recoverable amount CGU		$ 4,70,000.00
Impairment Loss			$    52,000.00
W.N.1 Carrying Amount of CGU
Cash			$    22,000.00
Accounts receivable(55000-15000)	$    40,000.00
Factory (195000-45000)	$ 1,50,000.00
Equipment (90000-10000)	$    80,000.00
Land			$ 2,10,000.00
Goodwill			$    20,000.00
Total			$5,22,000.00
Allocation of Impairment Loss
Impairment Loss			$    52,000.00
Less: Goodwill			$    20,000.00
Balance				$    32,000.00
Cash				$                  -	Financial Asset
Accounts receivable			$                  -	Financial Asset
Factory (15/44)			$    10,909.09
Equipment (8/44)			$      5,818.18
Land (21/44) upto (210000-204000)		$      6,000.00	Carrying Amount cannot be less then Fair vlaue less cost to sell
Balance				$      9,272.73
Factory (15/23)			$      6,047.43
Equipment (8/23)			$      3,225.30
Balance				$                  -
Impairment Value
Factory				$    16,956.52
Equipment			$      9,043.48
Land				$      6,000.00
Goodwill				$    20,000.00
Total				$    52,000.00
Journal Entry
Impairment Loss A/c Dr.	$    52,000.00
	To Factory		$    16,956.52
	To Equipment		$      9,043.48
	To Land			$      6,000.00
	To Goodwill		$    20,000.00