Mam Ltd acquired Bo Ltd on 1 July 2018 for cash of $7,000,000. At that date, Bo Ltd's net identifiable assets had a fair value of $5 800 000. The fair value of the net identifiable assets of Bo Ltd is determined as follows: (in $000)
Customer List.....................50
Machinery......................1450
Buildings.......................1500
Land..............................3000
......................................6000
Less: Bank Loan.............200
Net assets......................5800
At the end of the reporting period of 30 June 2019, the management of Mam Ltd determines that the recoverable amount of the cash-generating unit, which is considered to be Bo Ltd, totals $6 200 000. The carrying amount of the net identifiable assets of Bo Ltd, which excludes goodwill, has not changed since acquisition and is $5 800 000.
REQUIRED
(a) Prepare the journal entry to account for any impairment of goodwill.
(b) Assume instead that at the end of the reporting period the management of Mam Ltd determines that the recoverable amount of the cash-generating unit, which is considered to be Mam Ltd, totals $4 800 000. Prepare the journal entry to account for the impairment.