Impairment Quiz Questions

AACT2006 CORPORATE ACCOUNTING

IMPAIRMENT QUIZ QUESTIONS

1. In allocating an impairment loss for a cash generating unit which of the following assets would not be given a portion of the loss – land; machinery; inventory; manufacturing licence; receivables? Why? (1 Mark)

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

3. Peppermint Ltd has determined that its orchard division has suffered an impairment loss of $42 000 for the year ended 30 June 2013. At that date the carrying amount of the division’s assets were

$

Inventory 21 000

Land 200 000

Fruit Trees 114 000

Reticulation Systems 36 000

Goodwill 60 000

Required

Allocate the loss across the assets of the CGU in accordance with AASB 136, paragraph 104 and prepare the journal entry to record the loss. Show all workings. (2 Marks)

4. What is an impairment loss? (1 Mark)

5. What is a cash-generating unit? (1 Mark)

6. 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)

7. In allocating an impairment loss for a CGU the carrying amount of any individual asset must not be reduced below what figure? (1 Mark)

8. 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 Unit 50 000

Required

Allocate the loss across the assets of the CGU in...