At 30 June 2009, Reacher Ltd reported the following assets: $ Land 50,000 Plant

Question

At 30 June 2009, Reacher Ltd reported the following assets:

$
Land 50,000
Plant 250,000
Accumulated depreciation (50,000)
Goodwill 8,000
Inventory 40,000
Cash 2,000
All assets are measured using the cost model.

At 30 June 2009, the recoverable amount of the entity, considered to be a single cash-generating unit, was $272,000.

For the period ending 30 June 2010, the depreciation charge on plant was $18,400. If the plant had not been impaired the charge would have been $25,000.

At 30 June 2010, the recoverable amount of the entity was calculated to be $13,000 greater than the carrying amount of the assets of the entity. As a result, Reacher Ltd recognised a reversal of the previous year’s impairment loss.

Required:

(a) When reversing an impairment loss for a cash generating unit, how must the reversal be allocated?

(b) Prepare the journal entries relating to impairment at 30 June 2009 and 2010. Show all workings.

Explanation / Answer

FINANCIAL INFORMATION ABOUT COMPANY REACHER LTD Accounting Reference Date 30/11 Phone Last Accounts Made Up To 30/11/2010 (TOTAL EXEMPTION SMALL) Next Accounts Due 31/08/2012 Accounts document Show Company documents Last Return Made Up To 14/11/2010 Next Return Due 12/12/2011 Return document Show Company documents Last Members List 14/11/2010 WARNING This is public information provided by official company register. Materials about company: REACHER LTD have been prepared for information purposes only. They are not intended to be nor do they constitute legal advice. Data could have changed since the last update! This page shows information about REACHER LTD whose registered office according to registrar of companies is: UNIT 4 THE COTTAGES DEVA CENTRE TRINITY WAY MANCHESTER THE FOLLOWING COMPANIES REACHER CONSULTING LTD REACHERS CARS & MINIBUSES LTD REACH ESTATES LIMITED REACH EUROPE LTD REACH EVENTS & CONFERENCE SERVICES LIMITED Companies database provides public information about business subjects in the UK Page "REACHER LTD" has been loaded in 0.04308 s.

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