[ripon327]

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.

[morgaine300]

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