Impairment Quiz Questions 2014 1 1 Essay example

1236 Words Mar 7th, 2015 5 Pages
ADVANCED FINANCIAL ACCOUNTING 260
IMPAIRMENT QUIZ QUESTIONS

1. When should an entity conduct an impairment test? (2 Marks)

Assets that are consider to have uncertain carrying amounts must be tested every year for impairment.

Goodwill acquired in a business combination
Intangible assets with an indefinite useful life
Intangibles not yet ready for use

Impairment testing of all other assets is required only if there is an indication that they might be impaired due to events such as the economic and legal environment and market values etc.

2. How is an impairment test undertaken? (2 Marks)

The test involves comparing the carrying amount of an assets or CGU with its recoverable amount. The
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Required Determine if an impairment loss exists for the picnic ware division. Show all workings. (1 Mark)

310000 + 2000000 + 120000 + 75000 + 32000 = 737000 Carrying amount assets 680 000 Value in use

Impairment loss = 57000

14. Silkyoak Ltd has determined that its nursery division is a CGU. The carrying amounts of the net assets of the division at 30 June 2013 are: Land 80 000 Propagating Sheds 48 000 Sales Office 25 000 Equipment (net) 56 000 Inventory 35 000 Receivables 19 000 Accounts Payable (26 000) Mortgage Loan (50 000) Silky Oak Ltd has calculated the value in use of the division to be $327 000. Required Determine if an impairment loss exists for the nursery division. Show all workings. (1 Mark)

80, 000 + 48000 + 25000 + 56000 + 35000 + 19000 = 236000 Carrying amount 327000 Value in use

NO Impairment loss

15. Hovea Ltd has determined that its transport division has suffered an impairment loss of $52 000 for the year ended 30 June 2013. At that date the carrying amount of the division’s assets were $ Receivables 31 000 Inventory 18 000 Land 150 000 Trucks (net) 250 000 Servicing

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