Question

Ayayai Corporation purchased Kingbird Company 3 years ago and at that time recorded goodwill of $300,000. The Kingbird Division’s net assets, including the goodwill, have a carrying amount of $650,000. The fair value of the division is estimated to be $590,000.

Prepare Ayayais' journal entry, if necessary, to record impairment of the goodwill. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation	Debit	Credit
enter an account title	enter a debit amount	enter a credit amount
enter an account title	enter a debit amount	enter a credit amount

Answer 1

2)- The amount impairment of goodwill =$60000

Explanation- Impairment loss= Book value of goodwill – Implied value of goodwill

= $300000-$240000

= $60000

Where – Implied value of goodwill =Fair value of Division- Fair value of Kingbird Division’s net assets (excluding goodwill)

= $590000-($650000-$300000)

= $590000-$350000

= $240000

Journal Entry  to record impairment of the goodwill-

Event                 General Journal                                     Debit                    Credit        

  1          Loss on impairment of Goodwill                     $60000

                                 Goodwill                                                                      $60000

        (Being entry recorded impairment loss on goodwill)