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


  1. Calculate the impairment loss as at 30 June 2020:
  2. Prepare a table as provided below to allocate the above impairment loss:


ASSETS Carrying amount Proportion Loss allocated Adjusted carrying amount


(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.


  1. Record the journal entries (as per template below) as at 31 December 2019, relating to the revaluation of this plant. Include narrations.
  2. 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.


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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