Hooper Retailing Ltd (Hooper) operates a high fashion store in the Sydney CBD. Unfortunately, trading conditions have
Question:
Hooper Retailing Ltd (Hooper) operates a high fashion store in the Sydney CBD. Unfortunately, trading conditions have been difficult as customers are increasingly shopping online and Hooper has experienced increasingly poor performance (i.e., there are indicators of impairment).
Below is Hooper’s balance sheet as at 30 June 2018.
Liabilities | Assets | ||
Bank Overdraft | 300,000 | Cash | 10,000 |
Accounts Payable | 500,000 | Accounts Receivable | 200,000 |
Inventory | 700,000 | ||
Equity | 510,000 | Property Plant and Equipment - Net | 300,000 |
Goodwill | 100,000 | ||
Total | 1,310,000 | 1,310,000 |
Additional information
Hooper is a single cash generating unit.
The ‘value in use’ of the assets is estimated to be $1,050,000. Separately, an offer to purchase the company (all assets and liabilities) has been received from Pocock Limited for $310,000 immediately before 30 June 2018.
The accounts receivable relate to longstanding customers and it is expected that $195,000 will be recoverable.
Required
Prepare Journal entries to recognize the asset impairment required on 30 June 2018.
Expert Answer:
Carrying Value of Assets 1310000 Recoverable Amount of Assets Higher of Fair Value less Costs to sel... View the full answer
