Question 2Easter Ltd operates in Sydney, Australia where it is involved in the growing of grapes and theproduction of wine. In June 2021, it anticipated that its assets may be impaired due to a glut onthe market for grapes and an impending tax from the Australian government seeking to reducebinge drinking of alcohol by teenagers.Land is measured by Easter Ltd at fair value. At 30 June 2021, the entity revalued the land to itsfair value of $120 000. The land had previously been revalued upwards by $20 000. The tax rateis 30%.As a result of its impairment testing, Easter Ltd calculated that the recoverable amount of theentity's assets was $1 456 000.The carrying amounts of the assets of Easter Ltd prior to adjusting for the impairment test andthe revaluation of the land were as follows:Non-current assetsBuildingsAccumulated depreciationLand (at fair value 1/7/2020)Plant and equipmentAccumulated depreciationGoodwill$850 000(194 000)128 0001 454 000(750 000)60 000Accumulated impairment lossesTrademarks – wine labels(44 000)80 000Current assetsCash7 000Receivables9 000Required:i. Prepare the journal entries required on 30 June 2021 in relation to the measurement of theassets of Easter Ltd.ii. Assume that, as the result of the allocation of the impairment loss, the plant and equipmentwas written down to $640 000. If the fair value less costs of disposal of the plant andequipment was determined to be $600 000, outline the adjustments, if any, that would need tobe made to the journal entries you prepared in part (i) of this question, and explain whyadjustments are or are not required.

An impairment loss is a recognized reduction in the carrying amount of an asset that is triggered by…

production of wine. In June 2021, it anticipated that its assets may be impaired due to a glu the market for grapes and an impending tax from the Australian government seeking to re binge drinking of alcohol by teenagers. Land is measured by Easter Ltd at fair value. At 30 June 2021, the entity revalued the land fair value of $120 000. The land had previously been revalued upwards by $20 000. The tax is 30%.

production of wine. In June 2021, it anticipated that its assets may be impaired due to a glu the market for grapes and an impending tax from the Australian government seeking to re binge drinking of alcohol by teenagers. Land is measured by Easter Ltd at fair value. At 30 June 2021, the entity revalued the land fair value of $120 000. The land had previously been revalued upwards by $20 000. The tax is 30%.

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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