Question 1 Impairment of assets
1. Aero Ltd has determined that its aviation division is a cash–generating unit (CGU). Information as at 30th June 2020 is as follows:
| $ | |
| Buildings – At cost | 600,000 |
| Equipment – At cost | 500,000 |
| Inventory | 25,000 |
| Land | 250,000 |
| Receivables | 150,000
|
| Goodwill | 90,000 |
| Total | 1,615,000 |
Additional information:
Buildings – Accumulated depreciation as at 30 June 2020: $100,000
Equipment – Accumulated depreciation as at 30 June 2020: $200,000 Aero Ltd calculated the value in use for the division to be $515,000
Required:
- Calculate the impairment loss as at 30 June 2020:
- Prepare a table as provided below to allocate the above impairment loss:
| ASSETS | Carrying amount | Proportion | Loss allocated | Adjusted carrying amount |
| Totals |
(c) Prepare a general journal (as per template below) to record the above impairment loss for the year ended 30 June 2020. Include a narration
General Journal template:
| Date | Details | Debit ($) | Credit ($) |
Question 2 Revaluation of Non-current assets
The Balance sheet for Pluto Ltd disclosed the following information:
Pluto Ltd
Balance Sheet (extract)
30th June 2019 Non-current Assets:
Plant –At cost: $500,000
Accumulated depreciation-Plant $(150,000)
The company has adopted fair value for the valuation of non-current assets. This has resulted in the recognition in previous periods of an asset revaluation surplus/reserve for the plant of $60,000.
The plant has a useful life of 10 years and a zero residual value.
On 31st December 2019, it was decided to revalue this amount to its fair value of $200,000.
Required:
- Record the journal entries (as per template below) as at 31 December 2019, relating to the revaluation of this plant. Include narrations.
- Record the closing journal entries (as per template below)for any gain or loss on revaluation only, as at 30th June 2020. Include narrations.
Ignore any tax effects.
General Journal template:
| Date | Details | Debit ($) | Credit ($) |
Question 3 Share issue
Zorba Ltd was incorporated on 1 July 2019 and issued a prospectus inviting applications for 500,000 ordinary shares at an issue price of $10.
The shares are payable as follows:
- $5 payable on application
- $2 payable on allotment
- $3 payable on call to be made 30th September 2019 Share issue costs were $1,500 and legal costs were $500
The transactions for the period were as follows:
31 August 2019: Applications were received for 560,000 shares.
3 September 2019: Applications for 60,000 were rejected by the directors and the application money was refunded to the shareholders concerned.
4 September 2019: The Company allotted 500,000 shares to the remaining applicants.
25 September 2019: All the allotment money was received. Share issue and legal costs were paid in cash.
30 September 2019: The call was made on the shares, payable by 31 October 2019.
31 October 2019: Call money was received from the shareholders of only 480,000 shares.
31 December 2019: The remaining 20,000 shares were forfeited. The forfeited shares were offered to an investment company at a price of $8 per share paid to $10 and the transfer was completed on 31 March 2020. The costs of reissue amounted to $1,500.
The company’s constitution states that any forfeited shares must be refunded to the shareholders.
30 April 2020: These shareholders received a refund for the amount owed to them.
Required:
Prepare the general journal entries (as per template below) in the books of Zorba Ltd to record the above transactions. Provide narrations for all your entries.
General Journal template:
| Date | Details | Debit ($) | Credit ($) |
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