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 $ 241,000 $ 259,600 Trademark 199,000 173,900 Customer list 148,500 159,600 Goodwill 150,200 ? Liabilities (32,250 ) (32,250 ) Salty Dog Tangible assets $ 219,000 $ 219,000 Unpatented technology 232,000 171,500 Licenses 97,500 107,800 Goodwill 202,850 ? Baytowne Tangible assets $ 159,000 $ 175,800 Unpatented technology 0 120,000 Copyrights 57,250 96,850 Goodwill 118,000 ? The fair values for each reporting unit (including goodwill) are $682,350 for Sand Dollar, $709,300 for Salty Dog, and $653,650 for Baytowne. To date, Destin has reported no goodwill impairments. Determine which of Destin’s reporting units require both steps to test for goodwill impairment. How much goodwill impairment should Destin report this year?

Answer 1

Soution :- Destin has allocated the Yesorting good coil to its three reporting Destin provides the following individual asset & liability Vaves for each reporting unit Carrying Amoun I fair values Sand Donar Tangible assets $aut,000 $259,000 $ 173,900 $ 159,600 32,250 0 - Trade nayk Customes list $ 148.000 Chood will $150.200 Liabilities 32250 Sally dog Tangible assets $219.000 un pantented technoor 232,000 Lincenses 97,000 . Good will 402.850 Bay tone Tangible assets $159.000 unpatented fechoben Copy Yights 57,250 Chood coill 118.000 $219,000 171.500 107,800 $175.900 120,000 96,850 2

fair vaives. for each reporting unit for Sand Donar', $ 704, 300 for saity dog, for bay towne. are $682350 & $653,650 : Particulars Sand Dollar Salty dog | Bay fowne Tangible Assets 241,000 219,000 159,000 Trade mark 199,000 202,850 118,000 Costomer list 148,500 Good will 150,200 Liabilities 1-(32,250) unpalenied technology Licenses 238.000 97,500 57,250 Copyrights Carrying Valve 738,700-32,850 - 706,450 751,350 334,250 Carryin fair value Is Fair vawe Potential good less than Corning with impairment - BA vande (B) Varue Sand Donar | 682,350 1706,450 yes ges Saity Dog. 709,300754350 yes yes Baytowne 653,650 834,250 NO NO

fair tested for impairment, the Good will shaube fait vaive of the company is less than Cassying varve, their is potential good will impairment. by : Amount $ 682,350 Particulars Sand dollar - Total faro volve Less: faiy varves of identifiable net assets: Tangible assets Qu1,000 Trade mark 199,000 148,500 ( 31,250 1 556,250 customer list liabilities. implied value of gocci coil Carrying value of good will impairment loss 226,100 $150,200 $ 24,100 =201,000+199,000 +1u8,500 = 588,500 - 32,250 Liabilities =) 556,250

implied value of good will => $682,350 – 556,250 => 126,100 Carry vaive of good will * Carrying amounts of good will 150,200 impairment loss >150,200 - 126,100 -) 24,100 Sand donan should report good will impairment as Amount $ 24,100 Particulars Sarty Dog - Total fallu vaie less: Faiy voides of identifiable net asset! $709,300 Tangible assets 219,000 anpalented technology 232,000 97, 500 $48.500 Licenses implied value of good will carrying Value of good will impairment OSS 160.800 202,850 $ 42,050

Licenses =) 219,000 + 232,000+ 97,500 .548500 implied value of good will .. 709, 300 - 508,500 . = 160,800 impairment toss : : -) 202,850 - 160.800 -> U2,050 repost good will impairment aj :: Saity Dog Shaw $49,050