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Viti Ltd has three divisions, Dairy, Yoghurt and Chocolate, which operate independently of each other to produce

milk products. The company has a headquarters and a research centre located in Nausori, with the divisions located throughout Fiji. The research centre interacts with all the divisions to assist in the improvement of the manufacturing process and the quality of the products manufactured by the entity. 

 

There is not as yet any basis on which to determine how the work of the research centre will be allocated to each of the three divisions, as this will depend on priorities of the company overall and issues that arise in each division. The company headquarters provides approximately equal services to each of the divisions, but an immaterial amount to the research centre. 

 

Neither the headquarters nor the research centre generates cash inflows. 

 

On 30 June 2018, the net assets of Viti Ltd were as follows:

 

 

Dairy Yogurt Chocolate Head Research


Land  440,000 280,000 160,000 110,000 67,000

Plant and equipment 840,000 620,000 540,000 80,000 45,000

Accumulated depreciation (240,000) (200,000) (160,000) (10,000) (12,000)

Inventories 240,000 180,000 140,000 0 0

Accounts receivable 120,000 100,000 60,000 0 0

  1400,000 980,000 740,000 180,000 100,000

Liabilities 120,000 100,000 100,000 0 0

Net Assets 1280,000 880,000 640,000 180,000 100,000

Management of Viti Ltd believes there are economic indicators to suggest that the company's assets may be impaired. Accordingly, they have had recoverable amount assessed for each of the divisions:

Dairy Division                      $ 1,550,000

Yoghurt Division                     1,000,000

Chocolate Division                    750,000

 

The land held by Dairy division was measured at fair value using the revaluation model because of the specialised nature of the land. At 30 June 2018, the fair value was $440,000. The land held by Yoghurt division was measured at cost, and had a fair value less cost to sell of $270,264 at 30 June 2018. 

 

 

Required:

 

Provide journal entries to account for the impairment of Viti Ltd as at 30 June 2018. Show all relevant working where required.   

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