Read the following facts:

The merger between Northcorp and Carnation resulted in large losses for Northcorp resulting in a $642.5 million write-down of goodwill and a $240 million write-down of the value of the Carnation brand. Also the company recorded $95 million in one-off provisions and restructuring costs.

1 Using the definition of an asset, explain why the assets discussed within this extract would be written down.

2 What accounting concepts would have been considered when determining the write-down of assets?

3 Using the definition of a liability, explain why the provision discussed within this extract may have been created.

4 Show the effect on profit of each of the amounts of $642.5 million, $240 million and $95 million. What other accounts would be affected?

5 Provide possible journal entries for the items in question 4.