ACCA FR · Chapter 3 · Question 7 of 12
A cash-generating unit of Whimbrel Co contains goodwill of $150,000, a brand of $100,000 and property, plant and equipment of $400,000. None of these assets has an individually determinable recoverable amount. The unit's recoverable amount is $450,000. What is the carrying amount of the property, plant and equipment after the impairment loss is allocated?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) $360,000
Explanation
Impairment loss = $650,000 - $450,000 = $200,000. Goodwill is written off first ($150,000). The remaining $50,000 is spread across the other assets in proportion to their carrying amounts: PPE share = $50,000 x $400,000/$500,000 = $40,000. PPE carrying amount = $400,000 - $40,000 = $360,000. Figures are rounded to the nearest dollar.
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