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