Equipment Building Land Goodwill Carrying Value (thousands) S 600 650 700 550 $
ID: 2558007 • Letter: E
Question
Equipment Building Land Goodwill Carrying Value (thousands) S 600 650 700 550 $ 2,500 The recoverable amount has been determined to be $1,500. The separate fair value less costs to sell for land is $600; no other assets could be separately valued. Required: 1. Allocate the impairment loss to individual assets and calculate the net book value of each asset after the impairment. (Enter answers in thousands of dollars.) Carrying Value (thousands) Proportion Allocation of impairment lo5S Net book value $ 600 Equipment Building Land 650 Goodwill 700 550 2,500 2. Assume that the recoverable amount recovered to $1,800 in the subsequent year. Allocate the impairment reversal to individual assets and calculate the net book value of each asset after the impairment. The separate fair value less costs to sell for land remains at $600. There is no concem with a ceiling value when assigning the recovery to building or equipment. (Enter answers in thousands of dollars.) Carrying Value (thousands) Proportion Allocation of impairment loss Net book value Equipment Building Land GoodwillExplanation / Answer
Requirement 1 The impairement loss is $ 1,000 ($ 2,500- $ 1,500 recoverable amount) Carrying Value ( thousands) Proportion( Equipment and building only $ 900 base) Allocation of Impairement Loss Net Book Value Equipment $ 600 48% $ 168 (Working Note 3) $ 432 Building $ 650 52% $ 182 (Working Note 3) $ 468 Land $ 700 $ 100 (Working Note 2) $ 600 Goodwill $ 550 $ 550 (Working Note 1) $ - $ 2,500 $ 1,000 $ 1,500 Working Notes : 1 Allocated First 2 Allocated only to the limit of Fair value less cost to sell = ($ 700 - $ 600)= $ 100 3 Proportion based only on assets excluding land and goodwill ( $ 1,000 - $ 550 - $ 100 ); $ 320. ( $ 350 X *48 % )= $ 168 ( $ 350 X **52 % )= $ 182 *[$ 600/ ($ 600+$ 650)]X 100 = 48% **[$ 650/ ($ 600+$ 650)]X 100 = 52% Requirement 2 The impairement loss reversal is $ 300 ($ 1,800- $ 1,500) Carrying Value ( thousands) Proportion( Equipment and building only $ 1,250 base) Allocation of Impairement Loss Net Book Value Equipment $ 432 48% $ 144 (Working Note 3) $ 576 Building $ 468 52% $ 156 (Working Note 3) $ 624 Land $ 600 $ - (Working Note 2) $ 600 Goodwill $ - $ - (Working Note 1) $ - $ 1,500 $ 300 $ 1,800 Working Notes : 1 Not Reversed. 2 Not reversed because Fair value less cost to sell is not changed. = ($ 700 - $ 600)= $ 100 3 Proportion based only on assets excluding land and goodwill; $ 300. ( $ 300 X *48 % )= $ 144 ( $ 300 X **52 % )= $ 156 *[$ 432/ ($ 432+$ 468)]X 100 = 48% **[$ 468/ ($ 432+$ 468)]X 100 = 52%
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