A retailer was incorporated on April 1, 20X9. Its main business activity is resale of mobiles purchased from overseas manufacturer to local customers via store and online channel.

During FY 20X9/20X0 there were the following purchases of stock:

1. On May 1, 20X9 a retailer imported the first batch of 1,100 units of goods at a unit cost of CU 410, excluding CU 50 non-refundable import duties and CU 15 refundable purchase taxes.
2. On September 20, 20X9 a retailer imported further batch of 950 units of goods at a unit cost of CU 465, including CU 50 refundable import duties and CU 15 non-refundable purchase taxes.
3. On January 15, 20X0 (i.e. next calendar year) a retailer imported last batch of 1,210 units of goods in the year 20X9 at a unit cost of CU 475, including CU 50 non-refundable import duties and CU 15 non-refundable purchase taxes.

At each purchase the risks and rewards of ownership of the imported goods were transferred to the retailer upon collection of the goods from the harbor warehouse. The retailer incurred CU 35 to transport each batch of purchased goods to its retail outlet and a further CU 30 in delivering the goods to its customer. Further selling costs of CU 5 were incurred in selling the goods.

The sales of the retailer in FY 20X9/X0 were as follows:

1. During June-August, 20X9 the retailer sold 800 units of mobiles at selling price of CU 510 per unit.
2. During October-December, 20X9 the retailer sold 1,010 units of mobiles at selling price of CU 515 per unit.
3. During January-February, 20X0 the retailer sold 1,105 units of mobiles at selling price of CU 520 per unit.

Company uses FIFO method of accounting for stock and its year-end is March 31.

Task 1: Decide if the entity must record an impairment loss as per year-end - March 31, 20X0. If no, justify your answer. If yes, estimate its amount and write the relevant double entry.

PS: if you could provide the solution on excel it would be nice.

Answer rating: 100% (QA)

No the entity does not need to record an impairment loss as of yearend The entity has not incurre... View the full answer