Beast Ltd has identified recoverable amount on one of its CGUs to be $470,000. Land has...

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.

Expert Solution

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

ekkarill92 answered 2 years ago

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