Mavin Ltd operates in the Swan Valley in Australia where it grows grapes and produces wine. In June 2022, it anticipated that its assets may be impaired due to a glut on the market for grapes and an impending tax from the Australian government seeking to reduce binge drinking of alcohol by teenage Australians. The land is measured by Mavin Ltd at fair value. On 30 June 2022, the entity revalued the land to its fair value of $480 000. The land had previously been revalued upwards by $80 000. As a result of its impairment testing, Mavin Ltd calculated that the recoverable amount of the entity's assets was $650 000. The carrying amounts of the assets of Mavin Ltd prior to adjusting for the impairment test and the revaluation of the land was as follows. Non-current assets Buildings 340 000 Accumulated depreciation on buildings (77.600) Land (at fair value 1/7/21) 512 000 Plant and equipment 581 600 Accumulated depreciation on plant (300 000) Goodwill 64 000 32 000 Trademarks-wine labels Current assets Cash Receivables 28 000 36 000 Required 1. Prepare the journal entries required on 30 June 2022 in relation to the measurement of the assets of Mavin Ltd. 2. Assume that, as the result of the allocation of the impairment loss, the plant and equipment was written down to $256 000. If the fair value less costs of disposal of the plant and equipment was determined to be $240 000, outline the adjustments, if any, that would need to be made to the journal entries you prepared in part 1 of this question, and explain why adjustments are or are not required.
Mavin Ltd operates in the Swan Valley in Australia where it grows grapes and produces wine. In June 2022, it anticipated that its assets may be impaired due to a glut on the market for grapes and an impending tax from the Australian government seeking to reduce binge drinking of alcohol by teenage Australians. The land is measured by Mavin Ltd at fair value. On 30 June 2022, the entity revalued the land to its fair value of $480 000. The land had previously been revalued upwards by $80 000. As a result of its impairment testing, Mavin Ltd calculated that the recoverable amount of the entity's assets was $650 000. The carrying amounts of the assets of Mavin Ltd prior to adjusting for the impairment test and the revaluation of the land was as follows. Non-current assets Buildings 340 000 Accumulated depreciation on buildings (77.600) Land (at fair value 1/7/21) 512 000 Plant and equipment 581 600 Accumulated depreciation on plant (300 000) Goodwill 64 000 32 000 Trademarks-wine labels Current assets Cash Receivables 28 000 36 000 Required 1. Prepare the journal entries required on 30 June 2022 in relation to the measurement of the assets of Mavin Ltd. 2. Assume that, as the result of the allocation of the impairment loss, the plant and equipment was written down to $256 000. If the fair value less costs of disposal of the plant and equipment was determined to be $240 000, outline the adjustments, if any, that would need to be made to the journal entries you prepared in part 1 of this question, and explain why adjustments are or are not required.
Chapter18: Accounting Periods And Methods
Section: Chapter Questions
Problem 52P
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Transcribed Image Text:Mavin Ltd operates in the Swan Valley in Australia where it
grows grapes and produces wine. In June 2022, it anticipated
that its assets may be impaired due to a glut on the market for
grapes and an impending tax from the Australian government
seeking to reduce binge drinking of alcohol by teenage
Australians. The land is measured by Mavin Ltd at fair value.
On 30 June 2022, the entity revalued the land to its fair value
of $480 000. The land had previously been revalued upwards
by $80 000. As a result of its impairment testing, Mavin Ltd
calculated that the recoverable amount of the entity's assets
was $650 000. The carrying amounts of the assets of Mavin
Ltd prior to adjusting for the impairment test and the
revaluation of the land was as follows.
Non-current assets
Buildings
340 000
Accumulated depreciation on buildings (77.600)
Land (at fair value 1/7/21)
512 000
Plant and equipment
581 600
Accumulated depreciation on plant
(300 000)
Goodwill
64 000
32 000
Trademarks-wine labels
Current assets
Cash
Receivables
28 000
36 000
Required
1. Prepare the journal entries required on 30 June 2022 in
relation to the measurement of the assets of Mavin Ltd.
2. Assume that, as the result of the allocation of the
impairment loss, the plant and equipment was written
down to $256 000. If the fair value less costs of disposal
of the plant and equipment was determined to be $240
000, outline the adjustments, if any, that would need to
be made to the journal entries you prepared in part 1 of
this question, and explain why adjustments are or are
not required.
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