Question

Instructions Grand Champion Inc. purchased America's Sweethearts Corporation on January 1, 2016. At the time, America's Sweethearts had the following assets and liabilities (stated at fair value): Cash $63,000 Accounts receivable 142,000 Inventory 190,000 Property, plant, and equipment 300,000 Patent 65,000 Accounts payable 180,000 Notes payable 325,000 Grand Champion paid $900,000 for America's Sweethearts. Assume that America's Sweethearts is a reporting unit of Grand Champion. At the end of 2017, America's Sweethearts has a fair value of $700,000 and a book value of $850,000, which includes any goodwill recorded. Of this fair value, $340,000 is attributable to identifiable assets net of assets and liabilities (or identifiable net assets). Required: Calculate the impairment loss of goodwill (if any) and record the appropriate journal entry. Additional Instruction

Answer 1

Goodwill on acquisition
Cash	63000
Accounts receivable	142000
Inventory	190000
PPE	300000
Patent	65000
Accounts Payable	-180000
Notes Payable	-325000
Net fair value	255000
Amount paid	900000
Goodwill	645000
Fair value of goodwill =700000 - 340000 =			360000
Impairement loss=	360000- 645000		-285000
	Debit	Credit
Impairement Loss	285000
Goodwill		285000
( Being impairement loss recognised)