Question

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 amount of goodwill impairment to be recognized, if any, if Division K’s fair value is determined to be

1. $340,000.
2. $280,000.
3. $260,000.

Amount of Goodwill Goodwill Impairment

a.

b.

c.

Answer 1

of Net Dirlision & Calculation Reparting Cash Inventory Equipment Goodwill Assets of fan value Amount $14.000 $ 71,000 $ 190,000 $ 80.000 $355,000 130,000 $325,000 Les Accounts Payable Net Asset fain Market value Adinte mente Book faire (8) Value (8) Value 14,000 14000 Inventory 56,000 71.000 Equipment 170,000 90ooo Net Identifiable 240.000 275,000 Cash 15.000 20,000 35,000 Assek

Purchase Puce Allocation $325,000 $ 290,000 S & Total Purchase pvce Less Net Book Value of Assets Excel Purchase price. lessi fail Value Adjustment Goodwill as Excess Purchase Revice aftes. $ 35,000 $35,000 5 Adjustmen If k's fair value defenined to be AZIZZIMIT U $340,000 Amount of Goodwill Impairment : opet Alcets = $325,000 No Amount of Good will will be impaired 3 (1) $200,000 Net Assets - $325,000 Goodwill Impairment loss - $325,000 - $200,000 $45,000 Is

(i) 860,000 Net Assets = $325,000 Amount of Goodwill Impaiment a $3254000 $280,000 e $65,000