Reference no: EM132975408

Dan Ltd conducted an impairment test at 30 June 2020. As a part of that exercise, it measured the recoverable amount of the entity, considered to be a single CGU, to be $217 600.

The carrying amounts of the assets and liabilities of the entity at 30 June 2020 were:

Equipment $200 000
Accumulated depreciation (40 000)
Patent 40 000
Goodwill 6 400
Inventories 32 000
Receivables 1 600
Bank Overdraft 5 000
Accounts Payable 10 000

• The receivables held by Dan 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 2021, the depreciation charge on equipment was $14 720. If the plant had not been impaired the charge would have been $20 000. At 30 June 2021, the recoverable amount of the entity was calculated to be $10 400 greater than the carrying amount of the assets of the entity. As a result, Dan Ltd recognised a reversal of the previous year's impairment loss.

Required

Problem 1: Prepare the journal entry(ies) accounting for the impairment loss at 30 June 2020 and the reversal of the impairment loss at 30 June 2021.