Reference no: EM132956030

Question - ABC ltd has determined that its fine china division is a cash-generating unit. The carrying amounts of the assets at 30 June, 2020 are as follows

Factory $200,000

Less Accumulated Depreciation ($20,000)

Land $100,000

Equipment $80,000

Less Accumulated Depreciation ($8,000)

Goodwill $20,000

Inventory $50,000

Receivables $40,000

Cash $20,000

Carrying Amount $482,000

The directors of ABC Ltd estimate that, at 30 June 2020, the fair value less costs to sell of the cash-generating unit amounts to $420,000, while the value in use is $430,000. The land has a fair value less costs to sell of $95,000.

Required - Calculate the impairment loss that ABC Ltd needs to recognise for this cash-generating unit as at 30 June 2020, and determine how the loss is to be allocated between the assets of the cash-generating unit. Prepare any necessary journal entries to recognise the impairment loss. Show all workings and provide explanations to support your answer where necessary.