Question 5 [16 marks]

Impairment of assets

Foodie Ltd has two separate cash generating units, Fizzy Drinks and Ice creamery. At 30 June 2018, the carrying amounts of the assets of the units, valued pursuant to the cost model, are as follows:

	Fizzy Drinks	Ice creamery
	$	$
Cash	18,000	14,000
Inventory	34,000	25,000
Fixtures and fittings	25,000	35,000
Accumulated depreciation fixtures and fittings	(5,000)	(10,000)
Equipment	165,000	25,000
Accumulated depreciation equipment	(55,000)	(15,000)
Land and buildings	650,000	185,000
Accumulated depreciation buildings	(25,000)	(6,000)
Patent	25,000	-
Goodwill	40,000	15,000
Total	872,000	268,000

The inventory is recorded at the lower of cost and net realisable value. The patent has a fair value less costs to sell of $20,000. The land and buildings of Fizzy Drinks have a fair value less costs to sell of $620,000, and the land and buildings of Ice creamery have a fair value less costs to sell of $175,000.

On 30 June 2018, the directors of Foodie Ltd estimate that the fair value less cost to sell for Fizzy Drinks and Ice creamery amount to $750,000 and $260,000 respectively. The value in use of Fizzy Drinks and Ice creamery are estimated at $810,000 and $240,000 respectively.

Required:

Determine the impairment loss (if any) to be recognised by Foodie Ltd for each of its cash generating units as at 30 June 2018, and determine how the impairment loss (if any) is to be allocated. Prepare the journal entries to account for the impairment loss/losses (if any). Show all workings and provide references to the relevant accounting standard to support your answer.