ripon327
Oct 17, 2009, 06:58 AM
At 30 June 2009, Smithers Ltd reported the following assets:
Land $ 50 000
Plant 250 000
Accumulated depreciation (50 000)
Goodwill 8 000
Inventory 40 000
Cash 2 000
Additional information:
• All assets are measured using the cost model.
• At 30 June 2009, the recoverable amount of the entity, considered to be a single cash-generating unit, was $272 000.
• For the period ending 30 June 2010, the depreciation charge on plant was $18 400. If the plant had not been impaired the charge would have been $25 000.
• At 30 June 2010, the recoverable amount of the entity was calculated to be $13 000 greater than the carrying amount of the assets of the entity. As a result, Smithers Ltd recognised a reversal of the previous year’s impairment loss.
Required:
• Prepare the journal entries relating to the impairment at 30 June 2009.
• Prepare the journal entries relating to the impairment at 30 June 2010.
• Explain in your own words, using appropriate referencing, what guidance is provided by the standards in relation to recognition and reversal of impairment losses.
Land $ 50 000
Plant 250 000
Accumulated depreciation (50 000)
Goodwill 8 000
Inventory 40 000
Cash 2 000
Additional information:
• All assets are measured using the cost model.
• At 30 June 2009, the recoverable amount of the entity, considered to be a single cash-generating unit, was $272 000.
• For the period ending 30 June 2010, the depreciation charge on plant was $18 400. If the plant had not been impaired the charge would have been $25 000.
• At 30 June 2010, the recoverable amount of the entity was calculated to be $13 000 greater than the carrying amount of the assets of the entity. As a result, Smithers Ltd recognised a reversal of the previous year’s impairment loss.
Required:
• Prepare the journal entries relating to the impairment at 30 June 2009.
• Prepare the journal entries relating to the impairment at 30 June 2010.
• Explain in your own words, using appropriate referencing, what guidance is provided by the standards in relation to recognition and reversal of impairment losses.