Prepare the journal entries for the impairment loss

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Question - XYZ Company is an entity that specialises in the manufacture of leather footwear for women. The company reported the following assets in its statement of financial position at 30 June 2021, the entire company would be considered as a single cash generating unit:

Cash $300,000

Inventory $300,000

Factory Building $800,000

Accumulated depreciation-factory ($200,000)

Machinery $600,000

Accumulated depreciation-machinery ($200,000)

$1,600,000

Because of the competition from overseas as customers pursue a strategy of buying online rather than visit XYZ Ltd's stores, XYZ Ltd assessed its impairment position at 30 June 2021. The indicators suggested that an impairment loss was probable. XYZ Ltd calculated a recoverable amount of $1,500,000.

Required - Prepare the journal entries for the impairment loss occurring at 30 June 2021 (show all your working including the application of pro-rata method).

Reference no: EM133108320

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