Reference no: EM132670218
Question: Impairment Reversal
Arnold Ziffel Incorporated (AZI) owns a rhubarb candy factory in Tajikistan. The factory was purchased on 1 July 2013 for $15,000,000. At that time, the factory was expected to have a useful life of 30 years with a $0 residual value. Three years ago, it became very difficult to get the candy to market in Kashgar, because ofrebel activity in Goro-Badakshan. Consequently, on 30* June 2016 the factory was impairment tested, the recoverable amount was calculated to be $8, 100,000, and an impairment was recognised. There was no change in the expected life or residual value.
In mid-April of 2019, the Tajik government negotiated a peace deal returning peace to Gorno-Badakshan. Consequently, on 30* June 2019 it was determined that the recoverable amount of the factory was now $22,000,000. There was no change in the expected life or residual value.
a) Calculate the carrying amount of the factory just prior to the impairment on 30th, June 2016.
b) Show the journal entry for the impairment on 30th June, 2016.
c) Show any necessary journal entries on 30th June, 2017.
d) Calculate the carrying amount of the factory just prior to the impairment test (but after any depreciation entries) on 30th June, 2019.
e) Show any necessary journal entries relating to any additional impairment or impairment reversal 30th June, 2019.
f) Show any necessary journal entries on 30th June, 2020.
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