One of the cash-generating units of Lemon Ltd is associated with the manufacture of wine barrels....

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One of the cash-generating units of Lemon Ltd is associated with the manufacture of wine barrels. At 30 June 2009, Lemon Ltd believed, based on an analysis of economic indicators, that the assets of the unit were impaired. The carrying amounts of the assets and liabilities of the unit at 30 June 2009 were Buildings Accumulated depreciation - buildings Factory machinery Accumulated depreciation** - machinery Goodwill Inventory Receivables Allowance for doubtful debts Cash Account payable Loans 420 000 (180 000) 220 000 (40 000) 15 000 80 000 40 000 (5 000) 20 000 30 000 20 000 Depreciated at $60 000 p.a. **Depreciated at $45 000 p.a. Lemon Ltd determined the value in use of the unit to be $535 000. The receivables were considered to be collectable, except those considered doubtful. The company allocated the impairment loss in accordance with IAS 36. During the 2009-2010 period, Lemon Ltd increased the depreciation charge on buildings to $65 000 p.a. and to $50 000 p.a. for factory machinery. The inventory on hand at 1 July 2009 was sold by the end of the year. At 30 June 2010, Lemon Ltd, because of a return in the market to the use of traditional barrels for wines and an increase in wine production, assessed the recoverable amount of the cash-generating unit to be $30 000 greater than the carrying amount of the unit. As a result, Lemon Ltd recognised a reversal of the impairment loss. Required a. Prepare the journal entries for Lemon Ltd at 30 June 2009 and 2010 b. What differences would arise in relation to the answer in requirement a if the recoverable amount at 30 June 2010 was $20 000 greater than the carrying amount of the unit? c. If the recoverable amount of the buildings at 30 June 2010 was $175 000, how would this change the answer to requirement B? One of the cash-generating units of Lemon Ltd is associated with the manufacture of wine barrels. At 30 June 2009, Lemon Ltd believed, based on an analysis of economic indicators, that the assets of the unit were impaired. The carrying amounts of the assets and liabilities of the unit at 30 June 2009 were Buildings Accumulated depreciation - buildings Factory machinery Accumulated depreciation** - machinery Goodwill Inventory Receivables Allowance for doubtful debts Cash Account payable Loans 420 000 (180 000) 220 000 (40 000) 15 000 80 000 40 000 (5 000) 20 000 30 000 20 000 Depreciated at $60 000 p.a. **Depreciated at $45 000 p.a. Lemon Ltd determined the value in use of the unit to be $535 000. The receivables were considered to be collectable, except those considered doubtful. The company allocated the impairment loss in accordance with IAS 36. During the 2009-2010 period, Lemon Ltd increased the depreciation charge on buildings to $65 000 p.a. and to $50 000 p.a. for factory machinery. The inventory on hand at 1 July 2009 was sold by the end of the year. At 30 June 2010, Lemon Ltd, because of a return in the market to the use of traditional barrels for wines and an increase in wine production, assessed the recoverable amount of the cash-generating unit to be $30 000 greater than the carrying amount of the unit. As a result, Lemon Ltd recognised a reversal of the impairment loss. Required a. Prepare the journal entries for Lemon Ltd at 30 June 2009 and 2010 b. What differences would arise in relation to the answer in requirement a if the recoverable amount at 30 June 2010 was $20 000 greater than the carrying amount of the unit? c. If the recoverable amount of the buildings at 30 June 2010 was $175 000, how would this change the answer to requirement B?

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At 30 June 2017 the two assets are reported as follows ... View the full answer