Question

Destin Company recently acquired several businesses and recognized goodwill in each acquisition. Destin has allocated the resulting goodwill to its three reporting units: Sand Dollar, Salty Dog, and Baytowne. Destin opts to skip the qualitative assessment and therefore performs a quantitative goodwill impairment review annually.

In its current year assessment of goodwill, Destin provides the following individual asset and liability values for each reporting unit:

	Carrying Amounts			Fair Values
Sand Dollar
Tangible assets	$	247,000		$	261,900
Trademark		187,000			164,400
Customer list		134,250			153,550
Goodwill		189,750			?
Liabilities		(53,750	)		(53,750	)
Salty Dog
Tangible assets	$	294,000		$	294,000
Unpatented technology		194,000			125,250
Licenses		131,500			142,500
Goodwill		196,700			?
Baytowne
Tangible assets	$	182,000		$	201,300
Unpatented technology		0			156,750
Copyrights		74,000			108,000
Goodwill		94,000			?

The fair values for each reporting unit (including goodwill) are $694,850 for Sand Dollar, $766,750 for Salty Dog, and $754,050 for Baytowne. To date, Destin has reported no goodwill impairments.

1. Determine which of Destin’s reporting units require both steps to test for goodwill impairment.

2. How much goodwill impairment should Destin report this year?

Complete this question by entering your answers in the tabs below.

• Required A
• Required B

Determine which of Destin’s reporting units require both steps to test for goodwill impairment.

	Sand Dollar Salty Dog Baytowne

How much goodwill impairment should Destin report this year? (If any of the reporting units do not require both steps to test for goodwill, select NA from the dropdown list.)

	Sand Dollar Salty Dog Baytowne

Answer 1

Answer's en uŹ A); Sand Dollar Salty Dog | Baytowne Explanation - Total fair Totalcarrying potential value_ value G oodwill Impaired Explanation Sand Dollar $694,850 $704,250 yes Fair value is leythan Carrying value Salty Dog $ 766,750 $816,200 yes Fairvale isley than - carrying value Baytowne $ 754,050 $350,000 No Fair value is more theun carrying value Sand Dollar Impairment loss 1 $21,000 salty Dog No impairment. $0 Baytowne NIA (Impairment not applicable) $0 Explanation: Greodwill impairment for Sand Dollar Amount Amount Total fair valve (including goodwill) $694,850 Less; Fair values of identifiable net Tangible Assets Trademark 164,400 customer list Liabilities (53,750) $5261100 Implied value of goodwill #68,750 Lessi carrying value of goodwill $189,750 Jmpairment loss (Implied value $21,000 is less than carrying value] atlets 61,900 153,SSO

Explanations Goodwill impairment for Sality Dollar Amount | Amount Total fair valve Cincluding goodwill $ 766.750 Lexsi Fair values of identifiable net assets. Tangible assets. $294,000 un patented technology $ 1951950 licenses $149,500 $561,750 Implied value of goodwill $ 205,000 Carrying value of goodwill $196,700 Na impairment (implied value is $0 more than caroying valve)