Question: Question 1 ( 7 marks) Fabric Ltd acquired a Machine from Box Ltd for the following consideration: Cash $110 000, Land in the books of

Question 1 ( 7 marks)

Fabric Ltd acquired a Machine from Box Ltd for the following consideration:

Cash $110 000, Land in the books of Fabric Ltd the land is recorded at its cost of $950 000. It has a fair value of $1000 000.

Fabric Ltd also agreed to assume the liability of Box Ltd bank loan of $85 000 as part of the Machine acquisition.

Required:

  1. Calculate the acquisition cost of the Machine and provide the journal entries that would appear in Fabric ltd.s books to account for the acquisition of the Machine. (4 marks)
  2. In your own words, explain when should an impairment loss be recognised (3 marks)

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