On 1 July 2018 Fruit Ltd acquired from an external party a patent known as "Pear Inc" for a cash consideration of $1,500,000. The agreement stated the patent will expire on 30 June 2023. On 1 July 2018, the directors of Fruit Ltd also entered into another contract with a different unrelated third party who agreed to purchase the patent from Fruit Ltd on 30 June 2022 for $300,000.

Fruit Ltd has adopted the cost model for all classes of intangible assets and calculates amortisation on a straight-line basis over useful life.

There were no indicators of impairment during the year ended 30 June 2019. Subsequent to COVID-19 there were indicators of an impairment loss at 30 June 2020 and the recoverable amount of the Pear Inc patent at this date was estimated to be $740,000.

a.) Required:

Prepare ALL journal entries in relation to the Pear Inc patent for the year ended 30 June 2020.

Narrations are not required and ignore tax.

b.) Assume there are no indicators of impairment or impairment loss reversal in relation to the Pear Inc patent during the year ended 30 June 2021.

REQUIRED:

Calculate the carrying amount of the Pear Inc patent in Fruit Ltd's financial statements at 30 June 2021.

Answer rating: 100% (QA)

The following journal entries are required for Fruit Ltd for the year ended 30 June 2020 Amortizatio... View the full answer