Impairment of assets Rossi Ltd has a division that represents a separate cash generating unit. At 30 June 2012 the carrying amounts of the assets of the division valued pursuant to the cost model are as follows:Assets:$Plant and equipment400000Less: accumulated depreciation(90000)Land300000Inventory30000Accounts receivable20000Patents and trademarks50000Goodwill 90000Carrying amount of cash generating unit800000 The receivables were regarded as collectable and the inventory s fair value less costs to sell was equal to its carrying amount. The patents and trademarks have a fair value less costs to sell of $40000 and the land has a fair value less costs to sell of $270000. The directors of Rossi estimate that at 30 June 2012 the fair value less costs to sell of the division amounts to $650000 while the value in use of the division is $660000. As a result management increased the depreciation of the plant and equipment from $30000 p.a. to $40000 for the year ended 30 June 2013. By 30 June 2013 the recoverable amount of the cash generating unit was calculated to be $53000 greater than the carrying amount of the assets of the unit. Required:Determine how Rossi Ltd should account for the results of the impairment test at 30 June 2012 and 30 June 2013 and prepare any necessary journal entries. Show all workings.
