Practical Question 1 Accounting for Impairment

On 1 July 2019, Marvel Ltd acquired all the assets and liabilities of Strange Ltd. Strange Ltd has several operating divisions, including a frozen pie division that manufactures frozen pies for family dinners. The pie division is regarded as a separate cash-generating unit.

At 30 June 2020, the carrying amounts of the assets of the pie division were:

Factory	$300,000
Equipment	$100,000
Inventory	$250,000
Brand Moreish	$200,000
Goodwill	$90,000

There is a declining interest in Strange Ltds frozen pies due to a concern for the healthy eating, so the management of Marvel Ltd measured the recoverable amount of the pie division at 30 June 2020 determining it to be $790,000.

Inventory is measured at the lower of cost and net realisable value in accordance with AASB102 Inventories.

Required:

1. Allocate the impairment loss to assets in the CGU as per AASB136 (Please round off to the nearest dollar). (5 Marks)
2. Prepare journal entries to record the allocation of the impairment loss at 30 June 2020. Descriptions/Narrations are NOT required. (5 marks)