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Lawson Limited had two divisions, Mable and Gibbs, each of which was a separate cash-generating unit (CGU). Ariana Henry, CEO of Lawson Limited, adopted a
Lawson Limited had two divisions, Mable and Gibbs, each of which was a separate cash-generating unit (CGU). Ariana Henry, CEO of Lawson Limited, adopted a decentralised management approach and required all divisional managers to effectively autonomously operate their divisions. As at 30 June 2021, the net assets of each division were as follows: Land Plante Accumulated depreciation Goodwill Patent Accumulated amortisation Cash Inventories Receivables Assets Liabilities Net Assets Mable Gibbs HK$'000 HK$'000 2,700 1,740 7,860 5,760 (5,502) (2,304) 276 192 1,260 1,530 (126) (612) 120 72 72 480 204 240 6,864 7,098 (1,656) (1,134) 5,208 5,964 Impairment test was undertaken at 30 June 2021. The recoverable amount of Mable was HK$5,580,000 and that of Gibbs was HK$7,290,000. Mable's plant had a fair value less costs of disposal of HK$2,000,000.- Required: Explain how the impairment test was conducted and prepare any required journal entries to record the results of the impairment test for each of the cash-generating units
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