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 Make calculations and business combination journal entries in the presence of a differential, goodwill, or a bargain purchase element.
Bloom's: Apply
AACSB: Analytical Thinking
AICPA: FN Measurement
Please Explain why the answer is B
Homework Answers
Goodwill Impairment occurs when the carrying value of goodwill exceed the fair value of goodwill hence we need to record the impairment. In this situation if we see $350,000 is the carrying value of unit's net assets including goodwill of $60,000 which means net identifiable assets are $290,000 but the fair value is $300,000. Hence $10,000 impairment is recorded here. Than fair value of the reporting unit as a whole is $335,000 and the carrying value of the whole unit is $350,000 hence here $350,000 - $335,000 = $15,000 impairment will be considered. So totally $10,000 + $15,000 = $25,000.
Add Answer to:
29) The fair value of net identifiable assets of a reporting
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Porsche Company decided to measure goodwill impairment using the
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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
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Year
Present Value
of Future Cash Flows
Carrying Value of
Saab’s Identifiable
Net Assets*
Fair...
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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,...
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...
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...
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...
3. Under the provisions of the business combination rules, when the fair value of identifiable net assets acquired exceeds the investment cost, which of the following statements is correct? A) A gain from a bargain purchase is recognized for the amount that the fair value of the identifiable net assets acquired exceeds the acquisition price. B) The difference is allocated first to reduce proportionately (according to market value) non-current assets, then to non-monetary current assets, and any negative remainder is...
While performing a goodwill impairment test, the company had the following information: Estimated implied fair value of reporting unit $420,000 $400,000 Fair value of net assets on date of measurement (without goodwill) $380,000 Existing net book value of reporting unit (without goodwill) Book value of goodwill $ 60,000 Based upon this information the proper conclusion is: Select one: O a. The company should recognize a goodwill impairment loss of $40,000. O b. The company should recognize a goodwill impairment loss...
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