Question
Please answer question 2
Fiji Ltd has three divisions, Diet, Yummy and Chilled, which operate independently of each other to produce milk products. The company has a headquarters and a research centre located in Suva, with the divisions located throughout Fiji. The research centre interacts with all the divisions to assist in the improvement of the manufacturing process and the quality of the products manufactured by the entity There is not as yet any basis on which to determine how the work of the research centrel be allocated to each of the three divisions, as this will depend on priorities of the company overall and issues that arise in each division. The company headquarters provides approximately equal services to each of the divisions, but an immaterial amount to the research centre Neither the headquarters nor the research centre generates cash inflows. On 30 June 2017, the net assets of Fiji Ltd were as follows: Diet Division Division Office 160,000 110,000 540,000 $ 67,000 45,000 Land Accumulated depreciation 240,000 (200,000) 0,000) (10,000) Accounts receivable 840,000 620,000 80,000 nvntrisd depreciation 84000 $20.00ivn 180,000 140,000 1,400,000 100,000 Liabilities Net Assets Management of Fiji Ltd believes there are economic indicators to suggest that the company's assets may be impaired. Accordingly, they have had recoverable amount assessed for each of the divisions: Diet Division 1,550,000 1,000,000 Yummy Division Chilled Division The land held by Diet division was measured at fair value using the revaluation model because of the specialised nature of the land. At 30 June 2017, the fair value was $440,000. The land held by Yummy division was measured at cost, and had a fair value less cost to sell of S270,264 at 30 June 2017 Required Provide journal entries to account for the impairment of Fiji Ltd as at 30 June 2017. Show all relevant working where required
Explanation / Answer
The total recoverable for the divisions are;:
1. Diet division 15,50,000
2. Yummy division. 1000000
3. Chilled division 750000
In all the divisions recoverable amount is greater than carrying value, therefore no impairment loss is recognized.
In Yummy division land's carrying value is 280,000$
Recoverable amount(FV less costs to sell) = 270264$
Impairment loss = 9736$
Journal entry in the books of yummy:
Impairment loss a/c Dr. 9736$
To Land(FA)a/c Cr.