Larkspur Ltd. is a manufacturer of computer network equipment and has just recently adopted IFRS. The wireless
Question:
Larkspur Ltd. is a manufacturer of computer network equipment and has just recently adopted IFRS. The wireless division is a cash-generating unit or asset group that has the following carrying amounts for its net assets: land, $20,500; buildings, $24,480; and equipment, $11,520. The undiscounted net future cash flows from use and eventual disposal of the wireless division are $72,000, and the present value of these cash flows is $48,200. The land can be sold immediately for $34,100; however, the buildings and equipment are specialized and cannot be used elsewhere and thus have no resale value.
a-Allocate the impairment loss to the net assets of the wireless division using the cost recovery model under ASPE. (Credit account titles are automatically indented when the amount is entered.
b-Allocate the impairment loss to the net assets of the wireless division using the rational entity model under IFRS. (Credit account titles are automatically indented when the amount is entered.