Impairment Quiz Questions Essay

1.When should an entity conduct an itchment test? (2 Marks)Assets that are consider to have enigmatical carrying gets must be tried every year for prejudice. gracility acquired in a business combinationIntangible assets with an indefinite physical exerciseful spiritednessIntangibles not yet ready for useImpairment testing of only(a) former(a) assets is required only if there is an indication that they might be impair due to purgets such as the economic and legal purlieu and market treasures etc.2.How is an disablement test undertaken? (2 Marks)The test involves analyse the carrying core of an assets or CGU with its recoverable amount. The recoverable amount is the higher of pretty mensurate less cost to sell and it value in use.3.What is value in use? (1 Mark)Value in use is the present value of proximo silver flows expected to be derived from an asset or a CGU.4.How is value in use for a capital generating unit calculate? (2 Marks)It is a professional estimate b ased on past cash inflows and expected future cash inflows.5.What is an blemish want? (1 Mark)The passage of future economic benefit as the amount in the balance bed sheet for the asset or CGU exceeds it recoverable amount.6.What is a cash-generating unit? (1 Mark)A CGU is the smallest diagnosable group of assets that generates cash inflows that are largely independent of the cash inflows of other assets or groups of assets. CGU assets usually cannot be tested individually.7.How are corporate assets tested for impairment? (2 Marks)As they do not independently generate cash flows they are allocated to CGU on a reasonable or consistent basis. The dower of corporate assets is then tested along with the assets of the CGU to which it has been allotted.8.Supersatumas grows citrus harvest-time on a number of orchards in the Perth Hills. This growth is then processed into fruit juice and other products at their cannery. These products are then sold to the habitual via their chain of Jucymarket stores. How m any cash generating units would the association have? wherefore? (2 Marks)3 if there is an active market for the output of each(prenominal) stage. The stages being the fruit of the orchards, the processed products in their cannery and the juice sold in their stores. This is true even if all or part of the output produced is utilize internally.9.In allocating an impairment loss for a cash generating unit which of the following assets would not be granted a portion of the loss land machinery caudex manufacturing licence receivables? Why? (1 Mark)Inventory and accounts receivable. AASB 136 para 2 states that this standard does not apply to them as they are already covered (impaired) by other standards such as allowance for doubtful debts.10.In allocating an impairment loss for a CGU the carrying amount of anyindividual asset must not be reduced downstairs what figure? (1 Mark)The highest of it fair-value less cost to sell and its value in use or below zero.11.If a portion of an impairment loss for a CGU cannot be allocated to one of the units assets because it will breach AASB 136 divide 105 what happens to that portion? (1 Mark)It is allocated pro-rata to the other assets of that unit (group of units) that can be impaired further.12.Timbertown Ltd processes pine trees grown on its own plantations in its timber mills. The milled timber is then made into outdoor furniture for sale to the public. Is it practicable for Timbertown Ltd to have more than CGU? (2 Marks)Yes. If there is an active market for the output of each stage. This is true even if all or part of the output produced is used internally.13.Gumtree Ltd has ascertain that its picnic ware region is a CGU. The carrying amounts of the net assets of the variance at 30 June 2013 areFactory (net)$310 000Land200 000Equipment (net)120 000Inventory75 000Receivables32 000Accounts Payable(17 000)Do not impair liabilitiesGumtree Ltd has calculated the value in use of the divi sion to be $680 000. neededDetermine if an impairment loss exists for the picnic ware division. Show all workings. (1 Mark)310000 + 2000000 + 120000 + 75000 + 32000 = 737000 Carrying amount assets 680 000 Value in useImpairment loss = 5700014.Silkyoak Ltd has unconquerable that its nursery division is a CGU. The carrying amounts of the net assets of the division at 30 June 2013 areLand80 000Propagating Sheds48 000Sales Office 25 000Equipment (net)56 000Inventory35 000Receivables19 000Accounts Payable(26 000)Mortgage Loan(50 000)Silky oak Ltd has calculated the value in use of the division to be $327 000. requiredDetermine if an impairment loss exists for the nursery division. Show all workings. (1 Mark)80, 000 + 48000 + 25000 + 56000 + 35000 + 19000 = 236000 Carrying amount 327000 Value in useNO Impairment loss15.Hovea Ltd has determined that its transport division has suffered an impairment loss of $52 000 for the year terminate 30 June 2013. At that date the carrying amount of the divisions assets were$Receivables 31 000Inventory 18 000Land150 000Trucks (net)250 000Servicing Unit 50 000Cannot allocate to receivables and inventoryRequiredAllocate the loss across the assets of the CGU in accordance with AASB 136, separate 104. Show all workings. (3 Marks) You can drop to 150 450CA parceling New CA Land 150000 (150000 450000) 17333 132667 Truck 250000 (250000 450000) 28889 221111 Service Unit 50000 (50000 450000) 5778 44222 450000 about to nearest dollar from 0.5016.Tuart Ltd has determined that its sell division has suffered an impairment loss of $37 000 for the year ended 30 June 2013. At that date the carrying amount of the divisions assets were$Inventory 92 000Shop Fittings (net) 40 000Land100 000Buildings180 000Additionally, the company has corporate assets worth $150 000, one third of which have been allocated to the retail division.RequiredAllocate the loss across the assets of the CGU in accordance with AASB 136, divide 104. Show all workings (3 Marks)CA Allocation New CA Shop fittings 40000 (40000 370000) 4000 36000 Land100000 (100000 370000) 10000 90000 Building 180000 (180000 370000) 18000 162000 Corporate O/H 50000 (50000 370000) 37000017.Peppermint Ltd has determined that its orchard division has suffered an impairment loss of $42 000 for the year ended 30 June 2013. At that date the carrying amount of the divisions assets were$Inventory 21 000Land200 000Fruit Trees114 000Reticulation Systems 36 000Goodwill 60 000RequiredAllocate the loss across the assets of the CGU in accordance with AASB 136, split 104 and prepare the journal entry to record the loss. Show all workings. (2 Marks)Goodwill 60000 42000 = 18000 remaining goodwill201330 June Impairment loss 42000 Accumulated impairment losses goodwill 4200018.Can an impairment loss, once recorded, be reversed? (2 Marks)Yes an impairment loss recognised in previous period that no longish exists can be reversed in the current year. However an impairment of good will cannot be reversed.