Impairment Test and Journal Entry


Added on  2019-09-16

4 Pages1088 Words436 Views
AssignmentThis assignment has 2 parts, 1000 + 10% word theory interpretation essay and a response to a practical application ofthe theory.The assignment must be typed, use Arial font, 12, to avoid plagiarism, make sure you do proper referencing, at least use 6references, to be submitted the soft copy in Turnitin.Part A:1000 word short essay about the following:At 30 June 2014, Longreach Ltd is considering undertaking an impairment test. Having only recently adopted theinternational accounting standards, the management of Longreach Ltd seeks your advice in relation to this testunder AASB 136 Impairment of Assets.RequiredWrite a report to management, specifically explaining:1. the purpose of the impairment test2. how the existence of goodwill will affect the impairment test3. the basic steps to be followed in applying the impairment test.Part B:Crossbow Ltd is an entity that specialises in the manufacture of leather footwear for women. It has aggressively undertakena strategy of buying out other companies that had competing products. These companies were liquidated and the assets and
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liabilities brought into Crossbow Ltd.At 30 June 2015, Crossbow Ltd reported the following assets in its statement of financial position:Land$200 000Inventory products180 000Brand ‘Crossbow Shoes’160 000Shoe factory700 000Machinery for manufacturing shoes400 000Goodwill on acquisition of competing companies40 000$1 680 000Because of the competition from overseas as customers pursue a strategy of buying online rather than visit Crossbow Ltd’sstores, Crossbow Ltd assessed its impairment position at 30 June 2015. The indicators suggested that an impairment losswas probable. Crossbow Ltd calculated a recoverable amount of its company of $1420000. The fair value less costs ofdisposal of the land was $171 000.RequiredPrepare the journal entry(ies) for any impairment loss occurring at 30 June 2015.
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