(ii) Oracle Plc owned 100% of the equity share capital of Red Plc, a wholly owned subsidiary. The assets at the reporting date of Red Plc were as follows: Goodwill 2,400,000 Buildings 6,000,000 Plant and equipment 5,200,000 Other intangibles (patent) 2,000,000 Receivables and cash 1,400,000 Total 17,000,000 On the reporting date a fire within one of Red's buildings led to an impairment review being carried out. The recoverable amount of the business was determined to be £9.8 million. The fire destroyed some plant and equipment with a carrying value of £1.2 million and there was no option but to scrap it. The other intangibles consist of a licence to operate Red's plant and equipment. Following the scrapping of some of the plant and equipment a competitor offered to purchase the patent for £1.5 million. The receivables and cash are both stated at their realisable value and do not require impairment. Required: Show how the impairment loss in Red is allocated amongst the assets. Show all your workings

(ii) Oracle Plc owned 100% of the equity share capital of Red Plc, a wholly owned subsidiary. The assets at the reporting date of Red Plc were as follows: Goodwill 2,400,000 Buildings 6,000,000 Plant and equipment 5,200,000 Other intangibles (patent) 2,000,000 Receivables and cash 1,400,000 Total 17,000,000 On the reporting date a fire within one of Red's buildings led to an impairment review being carried out. The recoverable amount of the business was determined to be £9.8 million. The fire destroyed some plant and equipment with a carrying value of £1.2 million and there was no option but to scrap it. The other intangibles consist of a licence to operate Red's plant and equipment. Following the scrapping of some of the plant and equipment a competitor offered to purchase the patent for £1.5 million. The receivables and cash are both stated at their realisable value and do not require impairment. Required: Show how the impairment loss in Red is allocated amongst the assets. Show all your workings

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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