Reference no: EM132513174

Saxon Ltd conducted an impairment test at 30 June 2018. As a part of that exercise, it measured the recoverable amount of the entity, considered to be a single cash-generating unit, to be $217,600. The carrying amounts of the assets of the entity at 30 June 2018 were:

Equipment                                       200,000

Accumulated depreciation                    (39,000)

Patent                                               40,000

Goodwill                                              6,400

Inventories                                        31,000

Receivables                                           1,600

• The receivables held by Saxon Ltd were all considered to be collectable. The inventories were measured in accordance with AASB 102/IAS 2 Inventories.
• For the period ending 30 June 2019, the depreciation charge on equipment was $14,740. If the plant had not been impaired the charge would have been $20,000.
• At 30 June 2019, the recoverable amount of the entity was calculated to be $10,700 greater than the carrying amount of the assets of the entity. As a result, Saxon Ltd recognised a reversal of the previous year's impairment loss.

Required

Question 1: Prepare the journal entries accounting for the impairment loss at 30 June 2018 and the reversal of the impairment loss at 30 June 2019.