Solution-Prepare journal entries to account for the

Prepare journal entries to account for the impairment loss

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Reference no: EM131720473

Question - On 1 January 2015, Bad Ltd acquired all the assets and liabilities of Wolf Ltd. Wolf Ltd has a number of operating divisions, including one whose major industry is the manufacture of toy trains, particularly models of trains of historical significance. The toy trains division is regarded as a CGU. In paying $2 million for the net assets of Wolf Ltd, Bad Ltd calculated that it had acquired goodwill of $240 000. The goodwill was allocated to each of the divisions, and the assets and liabilities acquired measured at fair value at acquisition date.

At 31 December 2017, the carrying amounts of the assets of the toy train division were:

Factory	$250,000
Inventories	150,000
Brand - Froggy	50,000
Goodwill	50,000

There is a declining interest in toy trains because of the aggressive marketing of computer-based toys, so the management of Bad Ltd measured the value in use of the toy train division at 31 December 2017, determining it to be $475 000.

Required: Prepare the journal entries to account for the impairment loss at 31 December 2017.

Reference no: EM131720473

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Prepare journal entries to account for the impairment loss

Reference no: EM131720473

Reference no: EM131720473

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