Week 4 Snowy Ltd acquires Pax Ltd on 1 July 2018 for $5,000,000 being the fair value of the consideration transferred. At that date, Pax Ltd's net identifiable assets have a fair value of $4,400,000. Goodwill of $600,000 is therefore the difference between the aggregate of the consideration transferred and the net identifiable assets acquired. The fair value of the net identifiable assets of Pax Limited are determined as follows: ($000) Patent rights 200 Machinery 1,000 Buildings 1,500 Land 2,300 5,000 Less: Bank loan 600 Net assets 4,400 At the end of the reporting period of 30 June 2019, the management of Snowy Ltd determines that the recoverable amount of the cash-generating unit, which is considered to be Pax Ltd, totals $4,500,000. The carrying amount of the net identifiable assets of Pax Ltd, excluding goodwill, is unchanged and remains at $4,400,000. Required: a) Prepare the journal entry to account for any impairment of goodwill. (6 marks) b) Assume instead that at the end of the reporting period the management of Snowy Ltd determines that the recoverable amount of the cash-generating unit, which is considered to be Pax Ltd, totals $4,200,000. Determine the impairment of goodwill amount. (No journal entries required) (4 marks) Week 5 A. Alex purchased a CNC machine on 1st October 2019 at a cost of $110,000 (including GST). This machinery is estimated to have a useful life of seven years. B. Alex purchased a Holden car on 1 May, 2019 at a cost of $63,000, estimated to have a useful life of five years. Required: With reference to relevant legislation and case law, discuss and calculate what amount is allowed as a deduction for the decline in value of the machinery and the Holden car discussed above, using both prime cost and diminishing value methods. (10 marks, maximum 200 words) Week 4 Snowy Ltd acquires Pax Ltd on 1 July 2018 for $5,000,000 being the fair value of the consideration transferred. At that date, Pax Ltd's net identifiable assets have a fair value of $4,400,000. Goodwill of $600,000 is therefore the difference between the aggregate of the consideration transferred and the net identifiable assets acquired. The fair value of the net identifiable assets of Pax Limited are determined as follows: ($000) Patent rights 200 Machinery 1,000 Buildings 1,500 Land 2,300 5,000 Less: Bank loan 600 Net assets 4,400 At the end of the reporting period of 30 June 2019, the management of Snowy Ltd determines that the recoverable amount of the cash-generating unit, which is considered to be Pax Ltd, totals $4,500,000. The carrying amount of the net identifiable assets of Pax Ltd, excluding goodwill, is unchanged and remains at $4,400,000. Required: a) Prepare the journal entry to account for any impairment of goodwill. (6 marks) b) Assume instead that at the end of the reporting period the management of Snowy Ltd determines that the recoverable amount of the cash-generating unit, which is considered to be Pax Ltd, totals $4,200,000. Determine the impairment of goodwill amount. (No journal entries required) (4 marks) Week 5 A. Alex purchased a CNC machine on 1st October 2019 at a cost of $110,000 (including GST). This machinery is estimated to have a useful life of seven years. B. Alex purchased a Holden car on 1 May, 2019 at a cost of $63,000, estimated to have a useful life of five years. Required: With reference to relevant legislation and case law, discuss and calculate what amount is allowed as a deduction for the decline in value of the machinery and the Holden car discussed above, using both prime cost and diminishing value methods. (10 marks, maximum 200 words)
