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Mavin Ltd operates in the Swan Valley in Australia where it grows grapes and produces wine. In June 2022, it anticipated that its assets may be impaired due to a glut on the market for grapes and an impending tax from the Australian government seeking to reduce binge drinking of alcohol by teenage Australians. The land is measured by Mavin Ltd at fair value. On 30 June 2022, the entity revalued the land to its fair value of $480 000. The land had previously been revalued upwards by $80 000. As a result of its impairment testing, Mavin Ltd calculated that the recoverable amount of the entity's assets was $650 000. The carrying amounts of the assets of Mavin Ltd prior to adjusting for the impairment test and the revaluation of the land was as follows. Non-current assets Buildings 340 000 Accumulated depreciation on buildings (77.600) Land (at fair value 1/7/21) 512 000 Plant and equipment 581 600 Accumulated depreciation on plant (300 000) Goodwill 64 000 32 000 Trademarks-wine labels Current assets Cash Receivables 28 000 36 000 Required 1. Prepare the journal entries required on 30 June 2022 in relation to the measurement of the assets of Mavin Ltd. 2. Assume that, as the result of the allocation of the impairment loss, the plant and equipment was written down to $256 000. If the fair value less costs of disposal of the plant and equipment was determined to be $240 000, outline the adjustments, if any, that would need to be made to the journal entries you prepared in part 1 of this question, and explain why adjustments are or are not required.

Mavin Ltd operates in the Swan Valley in Australia where it grows grapes and produces wine. In June 2022, it anticipated that its assets may be impaired due to a glut on the market for grapes and an impending tax from the Australian government seeking to reduce binge drinking of alcohol by teenage Australians. The land is measured by Mavin Ltd at fair value. On 30 June 2022, the entity revalued the land to its fair value of $480 000. The land had previously been revalued upwards by $80 000. As a result of its impairment testing, Mavin Ltd calculated that the recoverable amount of the entity's assets was $650 000. The carrying amounts of the assets of Mavin Ltd prior to adjusting for the impairment test and the revaluation of the land was as follows. Non-current assets Buildings 340 000 Accumulated depreciation on buildings (77.600) Land (at fair value 1/7/21) 512 000 Plant and equipment 581 600 Accumulated depreciation on plant (300 000) Goodwill 64 000 32 000 Trademarks-wine labels Current assets Cash Receivables 28 000 36 000 Required 1. Prepare the journal entries required on 30 June 2022 in relation to the measurement of the assets of Mavin Ltd. 2. Assume that, as the result of the allocation of the impairment loss, the plant and equipment was written down to $256 000. If the fair value less costs of disposal of the plant and equipment was determined to be $240 000, outline the adjustments, if any, that would need to be made to the journal entries you prepared in part 1 of this question, and explain why adjustments are or are not required.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Mavin Ltd operates in the Swan Valley in Australia where it grows grapes and produces wine. In June 2022, it anticipated that its assets may be impaired due to a glut on the market for grapes and an impending tax from the Australian government seeking to reduce binge drinking of alcohol by teenage Australians. The land is measured by Mavin Ltd at fair value. On 30 June 2022, the entity revalued the land to its fair value of $480 000. The land had previously been revalued upwards by $80 000. As a result of its impairment testing, Mavin Ltd calculated that the recoverable amount of the entity's assets was $650 000. The carrying amounts of the assets of Mavin Ltd prior to adjusting for the impairment test and the revaluation of the land was as follows. Non-current assets Buildings 340 000 Accumulated depreciation on buildings (77.600) Land (at fair value 1/7/21) 512 000 Plant and equipment 581 600 Accumulated depreciation on plant (300 000) Goodwill 64 000 32 000 Trademarks-wine labels Current assets Cash Receivables 28 000 36 000 Required 1. Prepare the journal entries required on 30 June 2022 in relation to the measurement of the assets of Mavin Ltd. 2. Assume that, as the result of the allocation of the impairment loss, the plant and equipment was written down to $256 000. If the fair value less costs of disposal of the plant and equipment was determined to be $240 000, outline the adjustments, if any, that would need to be made to the journal entries you prepared in part 1 of this question, and explain why adjustments are or are not required.
Transcribed Image Text:Mavin Ltd operates in the Swan Valley in Australia where it grows grapes and produces wine. In June 2022, it anticipated that its assets may be impaired due to a glut on the market for grapes and an impending tax from the Australian government seeking to reduce binge drinking of alcohol by teenage Australians. The land is measured by Mavin Ltd at fair value. On 30 June 2022, the entity revalued the land to its fair value of $480 000. The land had previously been revalued upwards by $80 000. As a result of its impairment testing, Mavin Ltd calculated that the recoverable amount of the entity's assets was $650 000. The carrying amounts of the assets of Mavin Ltd prior to adjusting for the impairment test and the revaluation of the land was as follows. Non-current assets Buildings 340 000 Accumulated depreciation on buildings (77.600) Land (at fair value 1/7/21) 512 000 Plant and equipment 581 600 Accumulated depreciation on plant (300 000) Goodwill 64 000 32 000 Trademarks-wine labels Current assets Cash Receivables 28 000 36 000 Required 1. Prepare the journal entries required on 30 June 2022 in relation to the measurement of the assets of Mavin Ltd. 2. Assume that, as the result of the allocation of the impairment loss, the plant and equipment was written down to $256 000. If the fair value less costs of disposal of the plant and equipment was determined to be $240 000, outline the adjustments, if any, that would need to be made to the journal entries you prepared in part 1 of this question, and explain why adjustments are or are not required.
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