Prepare the necessary journal entry for impairment loss

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Reference no: EM132919647

On 30 June 2021, Hot Ltd determined that due to a downturn in the market for suitcases, that impairment testing needed to be conducted on the assets held in the Travel Products Division. Hot Ltd tests for impairment on assets by grouping each of its divisions into cash generating units (CGU).

On 30 June 2021 the net assets in the Travel Products Division were as follows:

30 June 2021
$

Cash 45,000
Inventory 80,000
Building 110,000
Accumulated depreciation - building (10,000)
Plant & Equipment (P&E) 160,000
Accumulated depreciation - P&E (100,000)
Goodwill 15,000
Accounts payable (30,000)
Provision for employee benefits (40,000)
Net assets $230,000

  • The building was determined to have a fair value of $90,000 on 30 June 2021.
  • Hot Ltd determined a recoverable amount for this CGU on 30 June 2021 to be $260,000.

Required:

Problem 1: Prepare the necessary journal entry for impairment loss on the Travel Products Division Ltd's as at 30 June 2021.

Reference no: EM132919647

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