Reference no: EM132942286

Question - Division One is one of the cash-generating units of Black Ltd. The carrying amounts of Division One's assets as at 30 June 20X3 are listed below.

Machinery $60,000

Accumulated depreciation (24,000)

Plant 80,000

Accumulated depreciation (32,000)

Cash 5,000

Accounts receivables 15,000

Inventory 10,000

Goodwill 12,000

Accounts payable 15,000

Long-term loans 10,000

Accounts receivables are regarded as collectable, and the inventory's fair value less costs of disposal is equal to its carrying amount. The depreciation expenses for Machinery and Plant are $12,000 and $16,000, respectively.

Due to poor economic conditions at 30 June 20X3, Black Ltd believes that Division One's assets may be impaired. Accordingly, Black Ltd determines the recoverable amount of Division One to be $106,000.Any impairment loss is allocated in accordance with AASB 136: Impairment of Assets.

Black recognises an impairment loss of $20,000 by recording the following journal entry:

Journal entry:

Impairment Loss $20,000

Goodwill $12,000

Acc'd Dep'n and impairment losses - Machinery 3,429

Acc'd Dep'n and impairment losses - Plant 4,571

(Allocation of impairment loss)

After the impairment loss has been recognised, Black Ltd increases the depreciation of Machinery and Plant to $16,000 and $20,000, respectively.

During the financial year 20X3-20X4, the economy has picked up and Black Ltd estimates the recoverable amount of Division One at $13,000 higher than its carrying amount. In particular, the recoverable amount of Plant at 30 June 20X4 is $31,000. Assume all inventory has been sold during the year, and no fixed asset has been written off.

Required - Prepare the relevant journal entries for Division One as at 30 June 20X4 to account for the reversal of the impairment loss in accordance with the requirements of AASB 136: Impairment of Assets. Please show all workings.