Reference no: EM132993948
Question - On 30 June 2021, Cold Ltd determined that due to a downturn in the market for DVD players that impairment testing needed to be conducted on the assets held in the Media Products Division. Cold 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 Media Products Division were as follows:
30 June 2021 $
Accounts receivable 45,000
Allowance for doubtful debts (5,000)
Inventory 65,000
Factory 80,000
Accumulated depreciation - factory (10,000)
Land 160,000
Goodwill 25,000
Accounts payable (30,000)
Borrowings (100,000)
Net assets $230,000
Land was determined to have a fair value of $140,000 on 30 June 2021.
Cold Ltd determined a recoverable amount for this CGU on 30 June 2021 to be $300,000.
Required - Prepare the necessary journal entry for impairment loss on the Media Products Division Ltd's as at 30 June 2021.
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