'Impairment Quiz Questions Essay\r'

'1.When should an entity look at an worsening test? (2 Marks)\r\nAssets that argon consider to countenance uncertain carrying totals must be tried tout ensemble(prenominal) twelvemonth for bollocksment.\r\nGoodwill acquired in a production line combination\r\nIntangible additions with an indefinite useful breeding\r\nIntangibles not yet ready for use\r\n evil testing of all former(a) assets is required totally if at that place is an indication that they might be damage due to events such as the economic and wakeless environment and marketplace cherishs etc.\r\n2.How is an wrong test undertaken? (2 Marks)\r\nThe test involves comparing the carrying meat of an assets or CGU with its recoverable amount. The recoverable amount is the higher of plumb nurture less cost to sell and it value in use.\r\n3.What is ‘value in use’? (1 Mark)\r\n survey in use is the present value of early specie in flows expected to be derived from an asset or a CGU.\r\n4.How is value in use for a cash generating social unit calculated? (2 Marks)\r\nIt is a headmaster estimate based on past cash inflows and expected future cash inflows.\r\n5.What is an impairment mischief? (1 Mark)\r\nThe bolshie of future economic benefit as the amount in the balance sheet for the asset or CGU exceeds it recoverable amount.\r\n6.What is a cash-generating unit? (1 Mark)\r\nA CGU is the smallest identifiable group of assets that generates cash inflows that are generally independent of the cash inflows of other assets or groups of assets. CGU assets unremarkably cannot be tested individually.\r\n7.How are unified assets tested for impairment? (2 Marks)\r\nAs they do not singly generate cash flows they are allocated to CGU on a reasonable or consistent basis. The portion of integrated assets is then tested along with the assets of the CGU to which it has been allotted.\r\n8.Supersatumas grows citrus reaping on a number of woodlets in the Perth Hills. This harves t-time is then refined into fruit juice and other products at their cannery. These products are then sold to the habitual via their chain of Jucymarket stores. How many cash generating units would the company down? Why? (2 Marks)\r\n3 if there is an active market for the fruit of each stage. The stages being the fruit of the orchards, the processed products in their cannery and the juice sold in their stores. This is lawful even if all or part of the end product produced is used internally.\r\n9.In allocating an impairment pass for a cash generating unit which of the following assets would not be given(p) a portion of the outrage †land; machinery; pedigree; manufacturing licence; receivables? Why? (1 Mark)\r\n stock and accounts receivable. AASB 136 para 2 states that this standard does not apply to them as they are already covered (impaired) by other standards such as allowance for doubtful debts.\r\n10.In allocating an impairment release for a CGU the carrying amoun t of any individual asset must not be reduced to a lower place what figure? (1 Mark)\r\nThe highest of it fair-value less cost to sell and its value in use or below zero.\r\n11.If a portion of an impairment injury for a CGU cannot be allocated to one of the unit’s assets because it will severing AASB 136 dissever 105 what happens to that portion? (1 Mark)\r\nIt is allocated pro-rata to the other assets of that unit (group of units) that can be impaired further.\r\n12.Timbertown Ltd processes pine trees self-aggrandizing on its own plantations in its timber mills. The svelte timber is then made into outdoor piece of furniture for sale to the public. Is it possible for Timbertown Ltd to view more than CGU? (2 Marks)\r\nYes. If there is an active market for the output of each stage. This is accredited even if all or part of the output produced is used internally.\r\n13.Gumtree Ltd has determined that its picnic ware partition is a CGU. The carrying amounts of the exon erate assets of the component part at 30 June 2013 are:\r\nFactory (net)$310 000\r\nLand200 000\r\nEquipment (net)120 000\r\nInventory75 000\r\nReceivables32 000\r\nAccounts Payable(17 000)\r\nDo not impair liabilities\r\nGumtree Ltd has calculated the value in use of the discrepancy to be $680 000.\r\nRequired\r\nDetermine if an impairment evil exists for the picnic ware division. shew all workings. (1 Mark)\r\n310000 + 2000000 + 120000 + 75000 + 32000 = 737000 Carrying amount assets 680 000 look on in use\r\nImpairment want = 57000\r\n14.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:\r\nLand80 000\r\nPropagating Sheds48 000\r\ngross revenue Office 25 000\r\nEquipment (net)56 000\r\nInventory35 000\r\nReceivables19 000\r\nAccounts Payable(26 000)\r\nMortgage Loan(50 000)\r\nSilky oak Ltd has calculated the value in use of the division to be $327 000.\r\nRequired\r\nDetermine if an im pairment bolshie exists for the nursery division. charge all workings. (1 Mark)\r\n80, 000 + 48000 + 25000 + 56000 + 35000 + 19000 = 236000 Carrying amount 327000 Value in use\r\nNO Impairment loss\r\n15.Hovea Ltd has determined that its transport division has suffered an impairment loss of $52 000 for the year ended 30 June 2013. At that date the carrying amount of the division’s assets were\r\n$\r\nReceivables 31 000\r\nInventory 18 000\r\nLand150 000\r\n transports (net)250 000\r\nServicing Unit 50 000\r\nCannot allocate to receivables and inventory\r\nRequired\r\ndeal the loss crossways the assets of the CGU in accordance with AASB 136, paragraph 104. Show all workings. (3 Marks) You can drop to 150 ÷ 450\r\nCA Allocation New CA Land 150000 (150000 ÷ 450000) 17333 132667 Truck 250000 (250000 ÷ 450000) 28889 221111 Service Unit 50000 (50000 ÷ 450000) 5778 44222 450000\r\nRound to nearest buck from 0.50\r\n16.Tuart Ltd has determined that its retail division has suffered an impairment loss of $37 000 for the year ended 30 June 2013. At that date the carrying amount of the division’s assets were\r\n$\r\nInventory 92 000\r\nShop Fittings (net) 40 000\r\nLand100 000\r\n builds180 000\r\nAdditionally, the company has corporate assets worth $150 000, one third of which have been allocated to the retail division.\r\nRequired\r\nAllocate the loss across the assets of the CGU in accordance with AASB 136, paragraph 104. Show all workings (3 Marks)\r\nCA Allocation New CA Shop fittings 40000 (40000 ÷ 370000) 4000 36000 Land\r\n100000 (100000 ÷ 370000) 10000 90000 Building 180000 (180000 ÷ 370000) 18000 162000 Corporate O/H 50000 (50000 ÷ 370000) 370000\r\n17.Peppermint Ltd has determined that its orchard division has suffered an impairment loss of $42 000 for the year ended 30 June 2013. At that date the carrying amount of the division’s assets were\r\n$\r\nInventory 21 000\r\nLand200 000\r\n take Trees114 000\r\nReticu lation Systems 36 000\r\nGoodwill 60 000\r\nRequired\r\nAllocate 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)\r\nGoodwill 60000 †42000 = 18000 remaining goodwill\r\n2013\r\n30 June Impairment loss 42000 Accumulated impairment losses †goodwill 42000\r\n18.Can an impairment loss, once recorded, be reversed? (2 Marks)\r\nYes an impairment loss recognised in foregoing period that no longer exists can be reversed in the current year. However an impairment of goodwill cannot be reversed.\r\n'