Question
At 30 June 2015, Mitchell Ltd reported the following cash-generating unit: Land $ 30 000 Plant 150 000 Accumulated depreciation (30 000)* Goodwill 4 800
At 30 June 2015, Mitchell Ltd reported the following cash-generating unit:
Land $ 30 000 Plant 150 000 Accumulated depreciation (30 000)* Goodwill 4 800 Accounts receivables (net) 24 000 Inventory 1 200
All items of property, plant and equipment are measured using the cost model. At 30 June 2015, the recoverable amount of the cash-generating unit was $163 200. For the period ending 30 June 2016, the depreciation charge on plant was $11 040. If the plant had not been impaired the charge would have been $15 000. At 30 June 2016, the recoverable amount of the unit was calculated to be $7 800 greater than the carrying amount of the assets of the unit. As a result, Mitchell Ltd recognized a reversal of the previous years impairment loss. Required: Prepare the journal entries relating to impairment at 30 June 2015 and 30 June 2016. (13 Marks) Note: You are required to show all workings and round up to the nearest dollar. Narrations are not required.
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