Question

Grand Champion Inc. purchased America’s Sweethearts Corporation on January 1, 2019. At the time, America’s Sweethearts had the following assets and liabilities (stated at fair value):

Cash	$62,000
Accounts receivable	138,000
Inventory	185,000
Property, plant, and equipment	300,000
Patent	65,000
Accounts payable	200,000
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 2020, America’s Sweethearts has a fair value of $720,000 and a book value of $850,000, which includes any goodwill recorded. Of this fair value, $350,000 is attributable to identifiable assets net of (or identifiable net assets) liabilities.

Required:

Calculate the impairment loss of goodwill (if any) and record the appropriate journal entry.

Answer 1

Calculation of impairment loss of Goodwill. Cash 62000 Accounts Receivable Inventory 185ooo fou pesty plant and equifhm300.000 Patent 650oo 138000 Total Assets 75oooo Less: Accounts foyble Less: Notes Payble 325.000 Net Assets 225000 (-brand chempion Paid 700000 Impairment hals of Goodwill 675000 - Journal Entry Particular Cash 62000 Accounts Receivable 138000 Inventory Property, Plant & Equipments 200000 Patent Goodwill To Accounts Payble To Notes payble e Date 185ooo 65000 675000 200000 325000 900000 To Sweet hearts coop