Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Leo plc has identified a cash generating unit that is composed of the following assets with the following book values: At the end of 2021

Leo plc has identified a cash generating unit that is composed of the following assets with the following book values:

image text in transcribed

At the end of 2021 the cash generating unit has been subjected to an impairment review. The review indicated that an item of equipment (included in the above figure of 170,000) with a carrying value of 30,000 has been severely damaged and that its recoverable value is now equal to 5,000. There is no other evidence of obvious impairment of other specific assets. The impairment review also revealed that the cash generating unit has a value in use of 510,000 and could be sold for 590,000. The associated selling costs would be 50,000.

REQUIRED:

  1. Calculate the associated impairment losses and allocate the impairment losses to the items of the cash generating unit at 31 December 2021. Explain the basis of your calculations.

  1. Discuss to what extent you believe that purchased and non-purchased intangible assets should be treated in the same accounting manner.
\begin{tabular}{|l|r|} \hline & \\ \hline Buildings & 470,000 \\ \hline Plants and equipment & 170,000 \\ \hline Goodwill & 260,000 \\ \hline Cash Generating Unit & 900,000 \\ \hline \end{tabular}

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Accounting questions

Question

At what level(s) was this OD intervention scoped?

Answered: 1 week ago