Question

PART ONE

1. On May 28, 2021, Pesky Corporation acquired all of the outstanding common stock of Harman, Inc., for $480 million. The fair value of Harman's identifiable tangible and intangible assets totaled $554 million, and the fair value of liabilities assumed by Pesky was $200 million.

Pesky performed a goodwill impairment test at the end of its fiscal year ended December 31, 2021. Management has provided the following information:

Fair value of Harman, Inc.	$	460	million
Fair value of Harman's net assets (excluding goodwill)		400	million
Book value of Harman's net assets (including goodwill)		482	million

Required:
1. Determine the amount of goodwill that resulted from the Harman acquisition.
2. Determine the amount of goodwill impairment loss that Pesky should recognize at the end of 2021, if any.

PART 2

Chadwick Enterprises, Inc., operates several restaurants throughout the Midwest. Three of its restaurants located in the center of a large urban area have experienced declining profits due to declining population. The company’s management has decided to test the assets of the restaurants for possible impairment. The relevant information for these assets is presented below.

Book value	$	7.1	million
Estimated undiscounted sum of future cash flows		4.3	million
Fair value		3.8	million

Required:
1. Determine the amount of the impairment loss.

3. If an impairment loss is required, prepare the journal entry to record the loss.

Answer 1

D Good will -- Assets liabilities)t consideration 2-(554 million - 200 million) +480 million = 480m-354m = $ 120 million) 2) Impairment loss... Implied goodwill => 460m-400m=bomillion Impairment loss → 126 m-60m = 166 million .) Impairment loss = 1300l value - faro fair value = 7.1 million – 3.8 million = $ 3,3 million 2) Impairment loss zero no entry required.