60.1K

Verified Solution

Link Copied!

Q3

On 1 January 2015, Bad Ltd acquired all the assets and liabilities of Wolf Ltd. Wolf Ltd has a number of operating divisions, including one whose major industry is the manufacture of toy trains, particularly those of historical significance. The toy trains division is regarded as a CGU. In paying $2 million for the net assets of Wolf Ltd, Bad Ltd calculated that it had acquired goodwill of $240 000.

The goodwill was allocated to each of the divisions, and the assets and liabilities acquired measured at fair value at acquisition date.

At 31 December 2018, the carrying amounts of the assets of the toy train division were:

Factory	$400 000
Accumulated depreciation factory	(150 000)
Inventory	$150 000
Brand Froggy	$50 000
Goodwill	$50 000
Total	500 000

There is a declining interest in toy trains because of the aggressive marketing of computerbased toys, so the management of Bad Ltd measured the value in use of the toy train division at 31 December 2018, determining it to be $423 000.

Required

Prepare the journal entries to account for the impairment loss at 31 December 2018.

	=
	=
	=

The journal entry to record the impairment loss is:

Answer & Explanation Solved by verified expert

See Answer