Reference no: EM132634810

Question - Saxon Ltd conducted an impairment test at 30 June 2018. As a part of that exercise, it measured the recoverable amount of the entity, considered to be a single cash-generating unit, to be $217,500. The carrying amounts of the assets of the entity at 30 June 2018 were:

Equipment 201,000

Accumulated depreciation (39,000)

Patent 39,000

Goodwill 6,400

Inventory 32,000

Receivables 1,600

The receivables held by Saxon Ltd were all considered to be collectable. The inventories were measured in accordance with AASB 102/IAS 2 Inventories.

For the period ending 30 June 2019, the depreciation charge on equipment was $14,800. If the plant had not been impaired the charge would have been $21,000.

At 30 June 2019, the recoverable amount of the entity was calculated to be $10,300 greater than the carrying amount of the assets of the entity. As a result, Saxon Ltd recognised a reversal of the previous year's impairment loss.

Required - Prepare the journal entries accounting for the impairment loss at 30 June 2018 and the reversal of the impairment loss at 30 June 2019?