Practical Question 1 Accounting for Impairment

On 1 July 2019, Gamora Ltd acquired all the assets and liabilities of Rocket Ltd. Rocket Ltd has several operating divisions, including a pizza division that manufactures frozen pizzas. The pizza division is regarded as a separate cash-generating unit.

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

Factory	$50,000
Equipment	$20,000
Inventory	$25,000
Brand Crusty	$30,000
Goodwill	$12,000

There is a declining interest in Rocket Ltds frozen pizzas due to a concern for the healthy eating, so the management of Gamora Ltd measured the recoverable amount of the pizza division at 30 June 2020 determining it to be $100,000.

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)

Asset	Carrying Amount	Proportion	Allocation of Loss	Adjusted Carrying Amount

2. Prepare journal entries to record the allocation of the impairment loss at 30 June 2020. Descriptions/Narrations are NOT required. (5 marks)

DATE	DESCRIPTION	DR	CR