At 30 June 2009, Reacher Ltd reported the following assets:
$
Land 50,000
Plant 250,000
Accumulated depreciation (50,000)
Goodwill 8,000
Inventory 40,000
Cash 2,000
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.
Required:
(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.