Reference no: EM133002695

Question - One of the CGUs of Sally Ltd is associated with the manufacture of wine barrels. At 30 June 2019, Sally Ltd believed, based on an analysis of economic indicators, that the assets of the unit were impaired.

The carrying amounts of the assets and liabilities of the unit on 30 June 2019 were:

Buildings $210,000

Accumulated depreciation - buildings* (90,000)

Factory machinery 110,000

Accumulated depreciation - machinery** (20,000)

Goodwill 7,500

Inventories 40,000

Receivables 20,000

Allowance for doubtful debts (2,500)

Cash 10,000

Accounts payable 15,000

Loans 10,000

*Depreciated at $30,000 p.a.

**Depreciated at $22,500 p.a.

Sally Ltd determined the recoverable amount of the CGU unit to be $267 500. The receivables were considered to be collectable, except those considered doubtful. The company allocated the impairment loss in accordance with AASB 136/IAS 36.

During the 2019-20 period, Sally Ltd increased the depreciation charge on buildings to $32 500 p.a., and to $25 000 p.a. for factory machinery. The inventories on hand on 1 July 2019 were sold by the end of the year. On 30 June 2020, Sally Ltd, because of a return in the market to the use of traditional barrels for wines and an increase in wine production, assessed the recoverable amount of the CGU to be $15 000 greater than the carrying amount of the unit. As a result, Sally Ltd recognised a reversal of the impairment loss.

Required - Make all the journal entries for Sally Ltd on 30 June 2019 and 30 June 2020 related to impairment and the reversal. (Show all the workings and round off to the nearest whole number).