ACF 2100-The Beverages Division is regarded as a cash

by | Mar 18, 2020 | Uncategorized

The Beverages Division is regarded as a cash-generating unit of Delta Ltd. At 30 June 2017, the carrying amounts of the assets of the CGU were as follows:

Premises $500,000

Inventory 90,000

Machinery 120,000

Vehicles 30,000

Goodwill 50,000

Delta Ltd measured the value in use of the Beverages Division at 30 June 2017, determining it to be $710,000. The company also determined that the fair value of the premises is $490,000.

Required

a. Explain why impairment testing requires the use of cash generating units (CGU).

b. Prepare the journal entry to account for the impairment loss at 30 June 2017 according to the requirements of AASB 136 Impairment of Assets. Explain the rationale for each working and journal entries.

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