Read the mini case of Very Good Ltd before answering Question 1 and Question 2. Very...

 

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Read the mini case of "Very Good Ltd" before answering Question 1 and Question 2. Very Good Ltd Very Good Ltd (VGL) is a company in Hong Kong selling kitchen equipment and accessories. The following transactions were taken place in 2019 and 2020. Acquisition of Golden Ltd On 1 July 2019, VGL acquired all the assets and liabilities of Golden Ltd (Golden) for $1,620,000 in cash. Golden sold various sauces in different retail shops, online stores and supermarkets. VGL planned to integrate the sauce business into its kitchen equipment and accessory business. On the acquisition date, Golden's statement of financial position reported assets of $1,300,000 and liabilities of $400,000. The fair value of Golden's assets was $1,600,000 on the acquisition date. Included in the assets were Golden's trade name with a fair value of $20,000 and a patent of famous sauce's with a fair value of $48,000. The trade name had a remaining useful life of 5 years and could be renewed at nominal cost indefinitely. The patent had a remaining useful life of 20 years. On 31 December 2019, VGL conducted impairment review on the acquired goodwill and e trade name and confirmed that they were not impaired. Impairment review in 2020 On 31 December 2020, the carrying amounts of one of its shops - Shop A (a cash generating unit (CGU)) were: Goodwill Shop property Equipment Cash Account payables $000 600 4,000 1,000 800 (100) Fair value less cost of disposal of the CGU Value in use of the CGU The recoverable amount of the shop property was $3,600,000 on 31 December 2020. 3,700 5.000 With reference to the impairment of Shop A, answer the following questions. (a) Determine the impairment loss of the shop on 31 December 2020. Show your workings. (b) Determine the new carrying amounts of the assets of Shop A after impairment. Explain your calculations and show your workings. (c) Suppose VGL plans to sell Shop A as a disposal group in December 2020. Suggest any four additional disclosures that should be made in the notes to the financial statements of VGL in 2020 when HKFRS 5 Non-current Assets Held for Sale and Discontinued Operations is applied. (8 marks) (19 marks) (8 marks) Read the mini case of "Very Good Ltd" before answering Question 1 and Question 2. Very Good Ltd Very Good Ltd (VGL) is a company in Hong Kong selling kitchen equipment and accessories. The following transactions were taken place in 2019 and 2020. Acquisition of Golden Ltd On 1 July 2019, VGL acquired all the assets and liabilities of Golden Ltd (Golden) for $1,620,000 in cash. Golden sold various sauces in different retail shops, online stores and supermarkets. VGL planned to integrate the sauce business into its kitchen equipment and accessory business. On the acquisition date, Golden's statement of financial position reported assets of $1,300,000 and liabilities of $400,000. The fair value of Golden's assets was $1,600,000 on the acquisition date. Included in the assets were Golden's trade name with a fair value of $20,000 and a patent of famous sauce's with a fair value of $48,000. The trade name had a remaining useful life of 5 years and could be renewed at nominal cost indefinitely. The patent had a remaining useful life of 20 years. On 31 December 2019, VGL conducted impairment review on the acquired goodwill and e trade name and confirmed that they were not impaired. Impairment review in 2020 On 31 December 2020, the carrying amounts of one of its shops - Shop A (a cash generating unit (CGU)) were: Goodwill Shop property Equipment Cash Account payables $000 600 4,000 1,000 800 (100) Fair value less cost of disposal of the CGU Value in use of the CGU The recoverable amount of the shop property was $3,600,000 on 31 December 2020. 3,700 5.000 With reference to the impairment of Shop A, answer the following questions. (a) Determine the impairment loss of the shop on 31 December 2020. Show your workings. (b) Determine the new carrying amounts of the assets of Shop A after impairment. Explain your calculations and show your workings. (c) Suppose VGL plans to sell Shop A as a disposal group in December 2020. Suggest any four additional disclosures that should be made in the notes to the financial statements of VGL in 2020 when HKFRS 5 Non-current Assets Held for Sale and Discontinued Operations is applied. (8 marks) (19 marks) (8 marks)

Answer rating: 100% (QA)

a Deter mine the impairment loss of the shop on 31 December 2020 Show your workings 8 marks ANS WER Imp air ment Loss Car rying Amount Recover able Am... View the full answer