Question

Question #5-Asset Impairment: The recording unit of Turner Technologies Inc. (TTI) has been suffering a decline in its business, due to new product introductions by competitors. At 31 December 2018, the assets of the abrasives cash- generating unit are shown as follows (in millions) on the company's SFP: Cost Accumulated Net Book Depreciation Value S 470 Equipment (10-year life) Fixtures (10-year life) 950 480 430 340 90 120 Patent rights (40-year life) 280 160 S1,660 $680 $980 An impairment test indicates that the recoverable amount of the recording cash-generating unit's assets is $870 million. The assets are not separable-they must be operated or sold together as a group. No individual asset has a determinable individual fair value less cost to sell. Required: Prepare an adjusting journal entry to record the impairment. 1. What would be the net book value of the assets after one year if no impaiment was recorded? Assume that straight-line depreciation is used. 2. 3. After one year, the recoverable amount is reassessed because of changes in the competitive market, and is found to be higher than $870 million. DESCRIBE how the impairment reversal would be allocated to the various assets of the unit.

Answer 1

(Amount in & Cash Genuatig Units (in millions) Equipment 480 fixtures 340 Patent Rights 160 Net Book value $980 Recoverable Amont 8 870 Impairment & 110 million Credit 110 53.88 38.16 o 17.96 debit 31 Dec. 2018 Impairment loss Equipment Fixtures Patent Rights (Impairment loss recognised) T.2 Equipment Fixtures Net Book Value at 31 Dec. 480 340 Less: Depreciation of 2019 (95) (43) (in Millions) Patent Rights V018 160 Net Book Value at 31 Dec. 2019 385 297 153 shown It is after assumed that "Wet Book Value at 31 Dec. 2018 are of charging Depreciation of 2018 year.

If there are change in Recoverable amount of assets and is found to be lighet than $870 million, then Impairment reversal can be lower of following two e- a) Recoverable Amount – Carrying amount or b) impairment loss earlier recognised less savings iu Depreciation It means Asset new carlyip Amant she should not go beyond Recoverable Amount and carrying Amount had thall been no Impairment loss earlicl. In our case, Recoverable amount is not given after one year, therefore Assets carrying amount should not be greater than as shown in Part 2 sowed above.
hope you liked my answer and if you do don't forget to give a Thumb's up.??