Allan owned 100% of the equity share capital of Jones & Jones Co., a wholly owned subsidiary. The assets at the reporting date of Jones & Jones were as follows: $'000 Goodwill 2,400 Building 6,000 Plant & Equipment 5,200 Other intangibles 2,000 Receivables & cash 1,400 Total 17,000 On the reporting date a fire within one of Jones & Jones building led to an impairment review being carried out. The recoverable amount of the business was determined to be $9.8million. The fire destroyed some plant and equipment with a carrying value of $1.2million and there was no option but to scrap it. The other intangibles consist of licence to operate Jones & Jones plant and equipment. Following the scrapping of some of the plant & equipment a competitor offered to purchase the patent for 1.5million. The receivables and cash are both stated at their realizable value and do not require impairment. Required: a) Show how the impairment loss in Jones & Jones is allocated amongst the assets. b) Record the journal entries for the impairment. c) Define a Cash Generating Unit (CGU)
Allan owned 100% of the equity share capital of Jones & Jones Co., a wholly owned subsidiary. The assets at the reporting date of Jones & Jones were as follows:
|
|
$'000 |
|
|
2,400 |
|
Building |
6,000 |
|
Plant & Equipment |
5,200 |
|
Other intangibles |
2,000 |
|
Receivables & cash |
1,400 |
|
Total |
17,000 |
On the reporting date a fire within one of Jones & Jones building led to an impairment review being carried out.
The recoverable amount of the business was determined to be $9.8million. The fire destroyed some plant and equipment with a carrying value of $1.2million and there was no option but to scrap it.
The other intangibles consist of licence to operate Jones & Jones plant and equipment. Following the scrapping of some of the plant & equipment a competitor offered to purchase the patent for 1.5million. The receivables and cash are both stated at their realizable value and do not require impairment.
Required:
a) Show how the impairment loss in Jones & Jones is allocated amongst the assets.
b) Record the
c) Define a Cash Generating Unit (CGU)
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