Accounting and Finance Assignment: Journal Entries and Impairment

This assignment solution addresses accounting and finance concepts, specifically focusing on journal entries, depreciation, revaluation, and impairment losses. Question 1 presents detailed journal entries for machinery purchases, depreciation, revaluation, and disposal, providing a comprehensive understanding of asset accounting. Question 2 delves into impairment losses, including journal entries for revaluation surplus and impairment loss allocation across various assets like land, buildings, plant, equipment, goodwill, and trademarks. The solution includes working notes and calculations for impairment loss allocation, demonstrating the application of accounting standards. Furthermore, the assignment includes a discussion on asset assessment and impairment, explaining how recoverable amounts are determined, and providing a bibliography for further reading.

Running Head: ACCOUNTING AND FINANCE 0
Accounting and Finance
(Student Name)

ACCOUNTING AND FINANCE 1
Table of Contents
Question 1........................................................................................................................................2
Question 2........................................................................................................................................4
Q A Journal entries......................................................................................................................4
Q B...............................................................................................................................................5
Bibliography....................................................................................................................................7

ACCOUNTING AND FINANCE 2
Question 1
Date Particular
L.F
.
Dr. (in
$)
Cr. (in
$)
1/1/2018 Machinery A A/c Dr. 4000
To cah A/c 4000
(Being machinery A purchased for cash)
1/1/2018 Machinery B A/c Dr. 10000
To cash A/c 10000
(Being machinery B purchased for cash)
31/12/201
8 Depreciation A/c Dr. 380
To Machinery A/c 380
(Being depreciation charged on machinery A )
31/12/201
8 Depreciation A/c Dr. 950
To Machinery A/c 950

ACCOUNTING AND FINANCE 3
(Being depreciation charged on machinery B )
30/06/201
9 Depreciation A/c Dr. 190
To Machinery A/c 190
(Being depreciation charged on machinery A )
30/06/201
9 Depreciation A/c Dr. 475
To Machinery A/c 475
(Being depreciation charged on machinery B )
30/06/201
9 Profit and Loss A/c Dr. 1330
To Depreciation A/c 1330
(Being depreciation accounted )
30/06/201
9 Revaluation Loss A/c Dr. 230
To Machinery A A/c 230

ACCOUNTING AND FINANCE 4
(Being loss accounted for revaluation)
30/06/201
9 Machinery B A/c Dr. 425
To Revaluation Surplus A/C 425
(Being profit accounted for revaluation )
2/1/2020 Repairs on machine B A/c Dr. 6600
To Cash A/c 6600
(Being repairs done on machinery B )
31/03/202
0 Depreciation A/c Dr. 95.31
To Machinery A A/c 95.31
(Being depreciation charged on machinery A )
31/03/202
0 Profit and Loss A/c Dr. 95.31
To Depreciation A/c 95.31
(Being depreciation accounted )

ACCOUNTING AND FINANCE 5
31/03/202
0 Machinery C A/c Dr. 6495
To Machinery A A/c Dr. 2800
To Bank A/c 3600
To Transportation And Installation Cost
A/c 95
( Being machine C purchased)
31/03/202
0 Profit and loss A/c Dr. 114.06
To loss on sale of machinery A A/c 114.06
(Being loss accumulated)
30/06/202
0 Depreciation A/c Dr. 819.67
To Machinery B A/c 177.97
To Machinery C A/c 641.7
(Being depreciation charged on machinery )

ACCOUNTING AND FINANCE 6
30/06/202
0 Profit and Loss A/c Dr. 819.67
To Depreciation A/c 819.67
(Being depreciation accounted )
30/06/201
9 Revaluation Loss A/c Dr. 420.8
To Machinery B A/c 420.8
(Being loss accounted for revaluation)
30/06/202
0 Machine C A/c Dr. 182.97
Profit on Revaluation A/c 182.97
(Being profit earned on Revaluation of Machinery C)

ACCOUNTING AND FINANCE 7
Question 2
Q A Journal entries
S.No. Particulars Dr. Cr.
1
Revaluation Surplus A/c
Dr. 39200
To Land 39200
(Being Revaluation done)
2
Impairment loss A/c
Dr.
44880
0
To Building
19742
5
To Land 9029
To Plant and Equipment
21187
0
To Trademark 24076
To Goodwill 6400

ACCOUNTING AND FINANCE 8
(Being impairment loss allocated first to goodwill then in
carrying amount ratio of assets)
Working Notes
The impairment of loss will first be credited to goodwill and then the remainder in the
correct combination of all related properties. The carrying ratio was regarded in this case
for the same number.
Table showing calculation of impairment loss :
Particulars
Amount in
$
Building 262400
Land 12000
Plant and Equipment 281600
Goodwill 6400
Trademark 32000
Total 594400

ACCOUNTING AND FINANCE 9
less: Recoverable
amount 145600
Impairment loss to be
allocated 448800
Impairment loss 448800
less : Goodwill 6400
to be allocated in rest of
assets in carrying
amount ratio 442400
Allocation of impairment loss
Particulars Building Land
Plant and
Equipment
Trademar
k Total
Carrying Amount 262400 12000 281600 32000 588000
Ratio 0.45 0.02 0.48 0.05 1
Impairment loss
distributed in above
ratio 197424 9028 211870 24076 442400

ACCOUNTING AND FINANCE 10
Q B
The deficiency deficit of $256,000 will correspond to the
impairment benefit — the impairment total of $28,1600
(58,1600-300,000) minus $256,000.
The journal entry would be:
S.No. Particulars Dr. Cr.
1 Impairment loss 59855
To Building 23855
To Land 1091
To Plant and Eqipment 25600
To Trademark 2909
To Goodwill 6400
(Being impairment loss allocated first to goodwill then in
carrying amount ratio of assets)

ACCOUNTING AND FINANCE 11
Calculation of total
impairment loss
Carrying value of plant and
equipment 281600
Less : Impaired value (given) 256000
Impairment loss 25600
Total impairment loss if it
would have allocated in
carrying amount ratio(Plant
impairment/carrying ratio of
plant)
(25600/0.48
)
53,45
4.55
Allocation of impairment loss
Particulars Building Land
Plant and
Equipment
Trademar
k Total
Carrying Amount 262400 12000 281600 32000 588000
Ratio 0.45 0.02 0.48 0.05 1
Impairment loss distributed in
above ratio 23855 1091 25600 2909 53455

ACCOUNTING AND FINANCE 12
Calculation showing total loss:
Impairment loss allocated 53455
Add : Adjusted by goodwill 6400
Total loss 59855
Asset assessment is the mechanism by which the present worth of an asset of a organization such
as inventories, structures, facilities, products, reputation etc. is calculated. It step also takes effect
before you purchase, sell or cover the commodity as part of a broader market assessment. A loss
of default happens when the valuation of a financial asset falls dramatically below the transport
expense. Essentially this assumes you will write back the difference if the valuation of a property
decreases so dramatically that the recoverable sum is greater than the carrying expense. The
higher dollar amount of an asset recoverable is the lower cost of its fair value or the value it
uses1. The selling cost is exactly what it seems — the cost of selling the asset. These may cover
things such as delivery rates, promotional expenses and storage costs. In order to determine the
market value of the assets minus the sale rate, sum up to the expense of selling the goods.
Therefore, the usage of capital applies to how much income you will produce, because the
commodity is held. The worth of potential cash flows. To assess the recoverable quantity you
need to quantify all these items, because it is less than the same. The valuation of the asset will
not be unfavorable or poorer than the equal value of the asset following damage. In the provided
asset problem, its fair value, i.e. $240,000 will not slip below it. Adjustment is then necessary2.
1 Zili Zhuang, "Discussion of ‘An evaluation of asset impairments by Australian firms and whether they
were impacted by AASB 136’." Accounting & Finance (2016) 56.1, 289-294.
2 Elizabeth A Gordon and Hsiao-Tang Hsu. "Tangible long-lived asset impairments and future operating
cash flows under US GAAP and IFRS." The Accounting Review (2018) 93.1: 187-211.

ACCOUNTING AND FINANCE 13
Bibliography
Gordon, Elizabeth A., and Hsiao-Tang Hsu. "Tangible long-lived asset impairments and future
operating cash flows under US GAAP and IFRS." The Accounting Review (2018) 93.1: 187-211.
Zhuang, Zili. "Discussion of ‘An evaluation of asset impairments by Australian firms and
whether they were impacted by AASB 136’." Accounting & Finance (2016) 56.1, 289-294.