Accounting for goodwill
Springhill Co. purchased the assets of Canyon Co. for $1,000,000 in 2011. The estimated fair market value of the assets at the purchase date was $920,000. Goodwill of $80,000 was recorded at purchase. In 2012, because of negative publicity, one-half of the goodwill purchased from Canyon Co. was judged to be permanently impaired.
Required
a. How will Springhill account for the impairment of the goodwill?
b. Prepare the journal entry to record the permanent impairment of goodwill.
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