Miles Ltd has two divisions, Jericho and Jackson. Each of these is regarded as a separate cash-generating unit. At 31 December 2009, the carrying amounts of the assets of the two divisions were:
| |
Jericho |
Jackson |
| |
$ |
$ |
| Plant |
1,500 |
1,200 |
| Accumulated depreciation |
(650) |
(375) |
| Patent |
240 |
- |
| Inventory |
54 |
75 |
| Receivables |
75 |
82 |
| Goodwill |
25 |
20 |
The receivables were regarded as collectable, and the inventory's fair value less costs to sell was equal to its carrying amount. The patent (Jericho) had a fair value less costs to sell of $220.
Miles Ltd undertook impairment testing at 31 December 2009, and determined the value in use of the two divisions to be: Jericho $1,044, Jackson $990.
Required: Prepare the journal entries for Miles Ltd in relation to the impairment exercise for 31 December 2009. Explain and justify your answers, showing all necessary workings.