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5. Mam Ltd acquired Bo Ltd on 1 July 2018 for cash of $7 000 000. At that date, Bo Ltd's net identifiable assets had
5. Mam Ltd acquired Bo Ltd on 1 July 2018 for cash of $7 000 000. At that date, Bo Ltd's net identifiable assets had a fair value of $5 800 000. The fair value of the net identifiable assets of Bo Ltd are determined as follows: ($000) 50 Customer list Machinery Buildings 1 450 1 500 Land 3 000 6 000 Less: Bank loan 200 Net assets 5 800 At the end of the reporting period of 30 June 2019, the management of Mam Ltd determines that the recoverable amount of the cash-generating unit, which is considered to be Bo Ltd, totals $6 200 000. The carrying amount of the net identifiable assets of Bo Ltd, which excludes goodwill, has not changed since acquisition and is $5 800 000. Required (a) Prepare the journal entry to account for any impairment of goodwill. 5 marks (b) Assume instead that at the end of the reporting period the management of Mam Ltd determines that the recoverable amount of the cash-generating unit, which is considered to be Mam Ltd, totals $4 800 000. Prepare the journal entry to account for the impairment. 5 marks
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