Question 1 Windsor Ltd. is a publicly listed company following IFRS. Assume that

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Question 1 Windsor Ltd. is a publicly listed company following IFRS. Assume that on December 31, 2017, the carrying amount of land on the statement of financial position is $530,000. Management determines that the land's value in use is $435,000 and that the fair value less costs to sell is $396,000 Your answer is partially correct. Try again. Using the rational entity impairment model, prepare the journal entry required, if any, to record the impairment loss. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Date Account Titles and Explanation Debit Credit December 31, 2017 Loss on Impairment 134000 Accumulated Impairment Losses Land 134000 SHOW LIST OF ACCOUNTS

Explanation / Answer

Carrying Value 530000 Value in Use 435000 Fair Value Less Disposal Cost 396000 Impairment Loss is when the Carrying value of an asset is more than its recoverable value. Recoverable value is higher of Value in use and Fair value less disposal cost In the Given Problem Recoverable Value is: Value in Use 435000 Fair Value Less Disposal Cost 396000 Recoverable Value 435000 Impairment Loss: Carrying Value 530000 Recoverable Value 435000 Impairment Loss 95000 Dec 31,2017 Loss on Impairment Account Dr. 95000 To Accumlated Impairement Loss-Land 95000 (Being Impairment in value of Asset recorded) Transfer to Profit & Loss Account: Dec 31,2017 Profit & Loss Account Dr. 95000 To Loss on Impairment Account 95000 By End of Next Year: Value in Use 568000 Fair Value Less Disposal Cost 457000 Recoverable Value 568000 Carrying Value 530000 Carrying Value Net of Impairment Loss 435000 Since the Recoverable value exceeds the original Carrying value as well as Carrying value net of IL. We need to reverse the impairment loss through profit & Loss account The Reversed loss cannot exceed the original carrying value. Dec 31,2018 Accumlated Impairement Loss-Land Dr. 95000 To Loss on Impairment Account 95000 (Being reversal of Impairment loss recorded) Transfer to Profit & Loss Account: Dec 31,2018 Loss on Impairment Account Dr. 95000 To Profit & Loss Account 95000

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