Hooper Retailing Ltd (Hooper) operates a high fashion store in the Sydney CBD. Unfortunately, trading conditions have been difficult as customers are increasingly shopping online and Hooper has experienced increasingly poor performance (i.e., there are indicators of impairment). Below is Hooper’s balance sheet as at 30 June 2018. Liabilites Assets Bank Overdraft 300,000 Cash 10,000 Accounts Payable 500,000 Accounts Receivable 200,000 Inventory 700,000 Equity 510,000 Property Plant and Equipment - Net 300,000 Goodwill 100,000 1,310,000 1,310,000 Additional information Hooper is a single cash generating unit. Hooper has received an offer to purchase the company (all assets and liabilities) from Pocock Limited for $310,000 immediately before 30 June 2018. The accounts receivable relate to longstanding customers and it is expected that $195,000 will be recoverable. The inventory has a net realisable value of $650,000. Required Prepare Journal entries to recognise the asset impairment required on 30 June 2018
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
Hooper Retailing Ltd (Hooper) operates a high fashion store in the Sydney CBD. Unfortunately, trading conditions have been difficult as customers are increasingly shopping online and Hooper has experienced increasingly poor performance (i.e., there are indicators of impairment).
Below is Hooper’s
|
Liabilites |
Assets |
||
|
Bank Overdraft |
300,000 |
Cash |
10,000 |
|
Accounts Payable |
500,000 |
|
200,000 |
|
Inventory |
700,000 |
||
|
Equity |
510,000 |
Property Plant and Equipment - Net |
300,000 |
|
|
100,000 |
||
|
1,310,000 |
1,310,000 |
Additional information
- Hooper is a single cash generating unit.
- Hooper has received an offer to purchase the company (all assets and liabilities) from Pocock Limited for $310,000 immediately before 30 June 2018.
- The accounts receivable relate to longstanding customers and it is expected that $195,000 will be recoverable. The inventory has a net realisable value of $650,000.
Required
- Prepare
Journal entries to recognise the asset impairment required on 30 June 2018.
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