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FAC3764 Assessment 6 18 July 2023
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  • Course
  • FAC3764 (FAC3764)
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  • University Of South Africa (Unisa)
  • Book
  • Gripping GAAP

This document contains suggested solution to FAC3764 assessment 6 18 July 2023, using this document will help provide step by step guidance to achieving a distinction.

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  • July 18, 2023
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  • 2022/2023
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FAC3764

Assessment 6

18 July 2023




a) Critique of Impairment Loss and Allocation of Impairment Loss Calculations:

The impairment loss and allocation of impairment loss calculations prepared by the junior
accountant of Bevmart Ltd on 30 June 2023 have some errors and inconsistencies. Let's review the
calculations:

1. Impairment Loss Calculation of the FF Division:

The impairment loss calculation includes the following assets:

• Goodwill: The carrying amount of goodwill is correctly stated at R125,000.

• Packaging Machinery: The carrying amount of the packaging machinery on 30 June 2023 is
calculated as follows: Carrying amount on 1 September 2020 = R1,575,000 - R18,500 (cash
payment) - R5,700 (consultant fee) = R1,550,800 Depreciation expense from 1 September
2020 to 30 June 2023 = (R1,550,800 - R185,000) / 84 months * 34 months = R794,800
Carrying amount on 30 June 2023 = R1,550,800 - R794,800 = R756,000 The correct
impairment loss for the packaging machinery would be R756,000 - R950,000 (recoverable
amount) = -R194,000, but impairment losses cannot be negative. Therefore, the packaging
machinery should not be impaired.

• Inventory: The carrying amount of inventory on 30 June 2023 is R48,000, and the net
realizable value is R45,000. As the carrying amount is already lower than the net realizable
value, there is no impairment loss for inventory.

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