Question

On January 1, 20X7, Proft Company purchased Strobe Company’s net assets and assigned them to four...

On January 1, 20X7, Proft Company purchased Strobe Company’s net assets and assigned them to four separate reporting units. Total goodwill of $176,000 is assigned to the reporting units as indicated: Reporting Unit A B C D Carrying value of reporting unit at 12/31/20X7 $ 700,000 $ 330,000 $ 380,000 $ 520,000 Goodwill included in carrying value 60,000 48,000 28,000 40,000 Fair value of net identifiable assets at 12/31/20X7 600,000 300,000 400,000 500,000 Fair value of reporting unit at 12/31/20X7 690,000 335,000 360,000 585,000 Required: Determine the amount of goodwill that Proft should report at December 31, 20X7.

0 0
Add a comment Improve this question Transcribed image text
Answer #1

Solution: $158,000

Working:

Cash-generating unit A: The implied value of goodwill will be $90,000 ($690,000 - $600,000) and the carrying amount of goodwill is $60,000. Thus the goodwill for the amount of $60,000 should be reported.

Cash-generating unit B: The fair value of the cash- generating unit (i.e. $335,000) is higher in comparison to the carrying value of the investment (i.e. $330,000). Thus the goodwill for the amount of $48,000 should be reported.

Cash-generating unit C: The fair value of the net assets (i.e. $400,000) is higher than the the fair value of the cash-generating unit (i.e. $360,000). Thus the goodwill for the amount of $0 should be reported.

Cash-generating unit D: The fair value of the cash- generating unit (i.e. $585,000) is higher than the carrying value of the investment (i.e. $520,000). Thus the goodwill for the amount of $50,000 should be reported.

Add a comment
Know the answer?
Add Answer to:
On January 1, 20X7, Proft Company purchased Strobe Company’s net assets and assigned them to four...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
  • On January 1, 20X1, Porta Corporation purchased Swick Company’s net assets and assigned goodwill of $80,000...

    On January 1, 20X1, Porta Corporation purchased Swick Company’s net assets and assigned goodwill of $80,000 to Reporting Division K. The following assets and liabilities are assigned to Reporting Division K on the acquisition date: Carrying Amount Fair Value Cash $ 14,000 $ 14,000 Inventory 56,000 71,000 Equipment 170,000 190,000 Goodwill 80,000 Accounts Payable 30,000 30,000 Required: On December 31, 20X3, Porta must test goodwill for impairment. Determine the amount of goodwill to be reported for Division K and the...

  • Please describe how you can solve this: Pout Company reports assets with a carrying value of...

    Please describe how you can solve this: Pout Company reports assets with a carrying value of $420,000 (including goodwill with a carrying value of $35,000) assigned to an identifiable reporting unit purchased at the end of the prior year. The fair value of the reporting unit is currently $350,000, and the carrying value of the net assets held by the reporting unit is $330,000. At the end of the current period, Pout should report goodwill of a. $45,000. b. $35,000....

  • On January 1, 2013, Porsche Company acquired the net assets of Saab Company for $450,420 cash....

    On January 1, 2013, Porsche Company acquired the net assets of Saab Company for $450,420 cash. The fair value of Saab's Identifiable net assets was $374,640 on this date. Porsche Company decided to measure goodwill Impairment using the present value of future cash flows to estimate the fair value of the reporting unit (Saab). The information for these subsequent years is as follows: Year 2014 2015 2016 Present Value of Future Cash Flows $400,600 $400,450 $350,410 Carrying Value of Saab's...

  • On January 1, 2013, Porsche Company acquired the net assets of Saab Company for $450,080 cash....

    On January 1, 2013, Porsche Company acquired the net assets of Saab Company for $450,080 cash. The fair value of Saab’s identifiable net assets was $374,890 on this date. Porsche Company decided to measure goodwill impairment using the present value of future cash flows to estimate the fair value of the reporting unit (Saab). The information for these subsequent years is as follows: For each year determine the amount of goodwill impairment, if any. Exercise 2-10 On January 1, 2013,...

  • 29) The fair value of net identifiable assets of a reporting unit of X Company is...

    29) The fair value of net identifiable assets of a reporting unit of X Company is $300,000. On X Company's books, the carrying value of this reporting unit's net assets is $350,000, which includes $60,000 of goodwill. If the fair value of the reporting unit as a whole is $335,000, what amount of goodwill impairment will be recognized for this unit? A) $0 B) $15,000 C) $25,000 D) $35,000 Answer: B Difficulty: 3 Hard Topic: Goodwill Impairment Learning Objective: 01-05...

  • On January 1, 2013, Porsche Company acquired the net assets of Saab Company for $450,080 cash....

    On January 1, 2013, Porsche Company acquired the net assets of Saab Company for $450,080 cash. The fair value of Saab’s identifiable net assets was $374,890 on this date. Porsche Company decided to measure goodwill impairment using the present value of future cash flows to estimate the fair value of the reporting unit (Saab). The information for these subsequent years is as follows: For each year determine the amount of goodwill impairment, if any. Please show work Exercise 2-10 On...

  • Exercise 2-10 On January 1, 2013, Porsche Company acquired the net assets of Saab Company for...

    Exercise 2-10 On January 1, 2013, Porsche Company acquired the net assets of Saab Company for $450,800 cash. The fair value of Saab’s identifiable net assets was $375,520 on this date. Porsche Company decided to measure goodwill impairment using the present value of future cash flows to estimate the fair value of the reporting unit (Saab). The information for these subsequent years is as follows: Year Present Value of Future Cash Flows Carrying Value of Saab’s Identifiable Net Assets* Fair...

  • Exercise 2-10 On January 1, 2013, Porsche Company acquired the net assets of Saab Company for...

    Exercise 2-10 On January 1, 2013, Porsche Company acquired the net assets of Saab Company for $449,660 cash. The fair value of Saab’s identifiable net assets was $375,570 on this date. Porsche Company decided to measure goodwill impairment using the present value of future cash flows to estimate the fair value of the reporting unit (Saab). The information for these subsequent years is as follows: Year Present Value of Future Cash Flows Carrying Value of Saab’s Identifiable Net Assets* Fair...

  • Exercise 2-10 On January 1, 2013, Porsche Company acquired the net assets of Saab Company for...

    Exercise 2-10 On January 1, 2013, Porsche Company acquired the net assets of Saab Company for $449,660 cash. The fair value of Saab’s identifiable net assets was $375,570 on this date. Porsche Company decided to measure goodwill impairment using the present value of future cash flows to estimate the fair value of the reporting unit (Saab). The information for these subsequent years is as follows: Year Present Value of Future Cash Flows Carrying Value of Saab’s Identifiable Net Assets* Fair...

  • Company A is assigned $200,000 of goodwill arising from a recent business combination. The current carrying...

    Company A is assigned $200,000 of goodwill arising from a recent business combination. The current carrying value of its net assets is $400,000 and the current fair value of its net assets, excluding goodwill, is $350,000. The fair value of the reporting unit is estimated to be $380,000. How much is the impairment loss? $150,000 $170,000 $180,000 $200,000

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT