Beautiful Tassie Ltd is a local seafood firm based in Launceston, Tasmania. At 30th June 2020, Beautiful Tassie Ltd reported the following in its statement of financial position:

Land $40,000

Plant 250,000

Accumulated depreciation-plant (- 90,000)

Goodwill 8,000 Inventories 40,000

Cash 52,000

All assets are measured using the cost model.

In response to competition from overseas seafood companies, Beautiful Tassie Ltd assessed its impairment position at 30 June 2020. The indicators suggested that an impairment loss was probable. Beautiful Tassie Ltd calculated the recoverable amount of the entity, considered to be a single CGU of $272,000.

For the period ending 30 June 2021, the depreciation charge on plant was $18,400. If the plant had not been impaired the charge would have been $25,000

At 30 June 2021, the recoverable amount of the entity was calculated to be $13,000 greater than the carrying amount of the assets of the entity. As a result, Beautiful Tassie Ltd recognised a reversal of the previous year’s impairment loss.

Required 1- Allocate impairment loss to assets and prepare general journal entries relating to impairment at 30 June 2020

2- Allocate impairment loss reversal to the assets and prepare general journal entries relating to reversal of impairment at 30 June 2021 [15 marks] [Total for Question 1 = 15 marks]

Solution 1(a) Space for calculation

 

 

 

 

Required 1 Allocation of impairment loss

Assets,   Carrying amount,   Proportion,   Allocation of loss,    Net carrying amount    

Journal entries

Date,   Accounts,       Dr       Cr

 

Allocation of reversal of impairment loss

Assets,   Carrying amount,    Proportion,    Share of reversal Adjusted,    carrying amount,

   

Journal entries

Date,       Accounts,     Dr        Cr.