At 30 June 2009, Reacher Ltd reported the following assets:
Accumulated depreciation (50,000)
All assets are measured using the cost model.
At 30 June 2009, the recoverable amount of the entity, considered to be a single cash-generating unit, was $272,000.
For the period ending 30 June 2010, the depreciation charge on plant was $18,400. If the plant had not been impaired the charge would have been $25,000.
At 30 June 2010, the recoverable amount of the entity was calculated to be $13,000 greater than the carrying amount of the assets of the entity. As a result, Reacher Ltd recognised a reversal of the previous year’s impairment loss.
(a) When reversing an impairment loss for a cash generating unit, how must the reversal be allocated?
(b) Prepare the journal entries relating to impairment at 30 June 2009 and 2010. Show all workings.