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Kelly Corporation acquires all of the assets and liabilities of Lawson Co. at an acquisition cost...

  1. Kelly Corporation acquires all of the assets and liabilities of Lawson Co. at an acquisition cost that is $50 million above the fair value of identifiable net assets acquired. Three months after the acquisition, it is determined that because of a downturn in the economy after the acquisition, acquired brand names with indefinite lives are worth $5,000,000 less than originally estimated.

    The entry to reflect this new information includes:

    A.

    A credit to goodwill of $5,000,000
    B.

    A debit to identifiable intangibles of $5,000,000
    C.

    A loss of $5,000,000, reported in income
    D.

    A gain of $5,000,000, reported in income
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Answer #1

ANSWER - B - A DEBIT TO IDENTIFIABLE INTANGIBLES OF $5000,000.00

Answer would be option "B" as the loss arises out of amalgamation of Kelly Corporation and Lawson Co. There is Decrease in the brand value which should be debited to intangibles as that would have been debited at the time of acquisition.

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