Question

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 Value Saab’s Identifiable Net Assets 2014 $400,280 $329,945 $339,384 2015 $400,340 $319,480 $345,215 2016 $349,770 $299,700 $325,430 * Identifiable net assets do not include goodwill.

(a) For each year determine the amount of goodwill impairment, if any. 2014 2015 2016 Goodwill impairment $ $ $ Part B: Prepare the journal entries needed each year to record the goodwill impairment (if any) on Porsche’s books from 2014 to 2016:

Answer 1

Anguera Pagano value of Goodwill: Acquisition Pori o tain value Goodwill $450,200 $ 345, 520 & 75,220 Year 2014 impossement test Plepi $400280 Fair valw Cajoying value of units : Identifiable not allet $399905 & 75280 $405.295 $(uqus اور راو Good will Total Excell of carrying over fair value Step " fair value Identifiable net allet. impaired Goodwill value Goodwill carrying valul impairment required $ 400380 $ 339384 $ 60896 $ 75280 $.14,384

Pagena |$400340 year 2015 impairment test Stepi fair value Carrying value of units Identifiable net allet Good will Total Excess of fair value over Carrying Valee $319480 $60896 $380,376 19,964 Step Not required Impairment of Good will Nil Year 2016 impaigment test: stepe's $ 349470 $299700 $60896 fair value Carorging value of anits: Identifiable net allets Good will Total Excess of Carrying value over fair value $360596 ($10,826

Pageno ştepli fais vale Identifiable net allet Impoined Goodwill value Good will Carrying value Impairment required $349.90 $325430 $ 24340 $ 60896 $36,556 6 Journal Entry Credit $14384 Date Account Tithe & Explanation Debit Dec 31 Impairment (loss) $14,384 2014 Good will To Record the Good call impair ment loss) Dec 31 2015 No Entory required $36 556 2016 Dec 31 Impairment (loss) Goodwill Go Record good will impairment loss) $36556