Practical Question 1 Accounting for Impairment

On 1 July 2021, Wanda Ltd acquired all the assets and liabilities of Vision Ltd. Vision 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. In paying $900,000 for the net assets of Vision Ltd, Wanda Ltd calculated that it had acquired goodwill of $50,000. The goodwill was allocated to each of the operating divisions, and the assets and liabilities were measured at fair value at acquisition date.

At 30 June 2022, the carrying amounts of the assets of the pie division were:

Factory	$150,000
Equipment	$50,000
Inventory	$25,000
Brand - 'Moreish'	$100,000
Goodwill	$50,000

There is a declining interest in Vision Ltds frozen pies due to a concern for the healthy eating, so the management of Wanda Ltd measured the recoverable amount of the pie division at 30 June 2022 determining it to be $310,000.

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

Required:

Allocate the impairment loss to assets in the CGU as per AASB136 (Please round off to the nearest dollar). (5 Marks)

Prepare journal entries to record the allocation of the impairment loss at 30 June 2022. Descriptions/Narrations are NOT required. (5 marks)

Asset	Carrying Amount	Proportion	Allocation of Loss	Adjusted Carrying Amount