Question 4 [20 marks] Accounting for impairment of assets On 1 January 2016 Bright Ltd (Bright) acquired all the assets of Star Ltd (Star). It was decided that Star is a Cash Generating Unit in its own right. At 31 December 2016, the carrying amounts of the assets for Star, including the goodwill that was recognised upon acquisition, were as follows: $ Buildings 1,200,000 Accumulated depreciation - buildings (320,000) Machinery 800,000 Accumulated depreciation - machinery (200,000) Inventory 320,000 Cash 200,000

Criteria High distinction Distinction Credit Pass Question 1: Demonstrate an understanding of the form and content of published financial reports prepared by reporting entities. Demonstrates a comprehensive understanding of the presentation requirements in AASB 101 Presentation of Financial Statements and the ability to apply these requirements to a Demonstrates a thorough understanding of the presentation requirements in AASB 101 Presentation of Financial Statements and the ability to apply these requirements to a Demonstrates a good understanding of the presentation requirements in AASB 101 Presentation of Financial Statements and the ability to apply these requirements to a range of practical Demonstrates a satisfactory understanding of the presentation requirements in AASB 101 Presentation of Financial Statements and the ability to apply these requirements to a Goodwill 80,000 Bright undertook impairment testing at 31 December 2016 and determined that the value in use of Star to be $1,920,000. The inventory is recorded at lower of cost and net realisable value. The buildings had a fair value less costs to sell of $836,000. Required: Provide the journal entries to account for the impairment loss for Star for the year ended 31 December 2016. It is essential to show all your workings and explain your answers where necessary. Note: Round all figures to the nearest dollar. Question 4 Max. marks awarded Allocation of impairment losses supported by explanations 14 Journal entries for impairment losses 4 Overall presentation 2 Total 20 Rationale