Question
Hooper Retailing Ltd (Hooper) operates a high fashion store in the Sydney CBD. Unfortunately, trading conditions have been difficult as customers are increasingly shopping online
Hooper Retailing Ltd (Hooper) operates a high fashion store in the Sydney CBD. Unfortunately, trading conditions have been difficult as customers are increasingly shopping online and Hooper has experienced increasingly poor performance (i.e., there are indicators of impairment).
Below is Hoopers balance sheet as at 30 June 2018.
| Liabilites |
| Assets |
|
| Bank Overdraft | 300,000 | Cash | 10,000 |
| Accounts Payable | 500,000 | Accounts Receivable | 200,000 |
|
|
| Inventory | 700,000 |
| Equity | 510,000 | Property Plant and Equipment - Net | 300,000 |
|
|
| Goodwill | 100,000 |
|
| 1,310,000 |
| 1,310,000 |
Additional information
- Hooper is a single cash generating unit.
- Hooper has received an offer to purchase the company (all assets and liabilities) from Pocock Limited for $310,000 immediately before 30 June 2018.
- The accounts receivable relate to longstanding customers and it is expected that $195,000 will be recoverable. The inventory has a net realisable value of $650,000.
Required
- Prepare Journal entries to recognise the asset impairment required on 30 June 2018.
answer:
Required 1
| Impairment - Inventory | 50,000 |
|
| Accum Impairment - Inventory |
| 50,000 |
|
|
|
|
| Impairment Acc Rec | 5,000 |
|
| Accum Impairment Acc Rec |
| 5,000 |
|
|
|
|
| Accum Impairment - PPE | 145,000 |
|
| Goodwill |
| 100,000 |
| Accum Impairment - PPE |
| 45,000 |
|
|
|
|
Below is Hoopers balance sheet as at 30 June 2019.
| Liabilites | Assets | ||
| Bank Overdraft | 300,000 | Cash | 10,000 |
| Accounts Payable | 500,000 | Accounts Receivable | 180,000 |
| Inventory | 720,000 | ||
| Equity | 360,000 | Property Plant and Equipment - Net | 250,000 |
| Goodwill | - | ||
| 1,160,000 | 1,160,000 |
Additional information at 30 June 2019
- Hooper did not accept the original offer from Pocock Ltd. However, in June 2019 (i.e., a year later) a revised offer was received from Pocock Ltd for $500,000. All the inventory held at 30 June 2018 has been sold.
- Payment from all the accounts receivable at 30 June 2018 have been received.
- Depreciation on property plant and equipment was $25,000. If the impairment had not occurred the depreciation would have been $30,000 in 2018/9.
Required
2. Prepare journal entries to recognise any reversal of impairment on 30 June 2019.
Hi tutor, I have got the correct answer below: could you tell that how$40000 comes from? thanks
| Goodwill | 0 | |
| A/R | 0 | |
| Accum Impairment -Inventory | 0 | |
| Accum Impairment - PPE | 40,000 | |
| Impairment Expense | 40,000 |
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Entrepreneurship
Authors: Andrew Zacharakis, William D Bygrave
5th Edition
1119563097, 9781119563099
