Revision set 1
(a) Carrying amount =$7,000,000
FV- cost of sell = $6,900,000-$400,000 =$6,500,000
Value in use = $6,600,000
Recoverable amount = higher of fair value less cost of sell OR value in use
Recoverable amount = $6,500,000 OR $ 6,600,000 =$6,600,000
(b) Journal entry at 30 June 2023:
Impairment loss =$7,000,000-$6,600,000=$400,000
Impairment loss DR $400,000
Land CR $400,000
1. Carrying amount =$3,500,000
FV -cost of sell = $3,460,000-$170,000= $3,290,000
Recoverable amount = higher of fair value less cost of sales OR value in use
Recoverable amount = $3,290,000 OR $3,340,000 =$3,340,000
2. Journal entry at 30 June 2023
3. Impairment loss =$3,500,000 - $3,340,000=$160,000
Impairment loss DR $160,000
Land CR $160,000
Carrying amount =$615,000
Recoverable amount=$490,000
Impairment loss =$615,000-$490,000=$125,000
Journal entry at 30 June 2022:
Impairment loss DR $50,000
Plant CR $62,500
Intangible assets CR $25,000
Land CR $37,500
Allocated assets:
W1 Carrying amount Impairment Impairment Value
Plant $250,000 ($62,500) $225,000
Intangible assets $100,000 ($25,000) $75,000
Land $150,000 ($37,500) $112,500
CGU $500,000 ($125,000) $375,000
W2
Plant = (325-75)/500 * $125,000=$62,500
Intangible assets =(150-50)/500*$125,000=$25,000
Land =150/500*$125,000=$37,500
1. Carrying amount =$1,299,000
Recoverable amount =$1,215,000 OR $1,100,000 =$1,215,000
Impairment loss =$1,299,000-$1,215,000= $84,000
Allocated of impairment loss:
Carrying amount Impairment Impairment value
Information $116,000 ($5,317) $110,683
Technology network
Land $290,000 ($13,292) $276,708
Plant $576,000 ($26,401) $549,599
Goodwill $32,000 ($32,000) 0
Patent $152,500 ($6,990) $145,510
CGU $1,166,500 ($84,000) $1,082,500
W1
Information Technology network =($116,000/$1,134,500)*$52,000=$5,317
Land = ($290,000/$1,134,500)*$52,000=$13,292
Plant =($576,000/$1,134,500)*$52,000=$26,401
Patent =($152,500/$1,134,500)*$52,000=$6,990
2. Journal entry at 30 June 2022
Impairment loss DR $84,000
Information Technology network CR $5,317
Land CR $13,292
Plant CR $26,401
Goodwill CR $32,000
Patent CR $6,990
An entity owns a property which was originally purchased for $300,000. The property
has been revalued to $500,000 with the revaluation of $200,000 being recognized as
other comprehensive income and recorded as revaluation reserve. The property has a
current carrying value of $460,000 but the recoverable amount of the property has just
been estimated at only $200,000.
Required: What is the amount of impairment and how should this be treated in the
financial statements?
Carrying amount =$460,000
Recoverable amount =$200,000
Impairment loss=$260,000
Journal entry:
Impairment loss DR $60,000
Revaluation surplus DR $200,000
Property CR $260,000
