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Destin Company recently acquired several businesses and recognized goodwill in each acquisition. Destin has allocated the...

Destin Company recently acquired several businesses and recognized goodwill in each acquisition. Destin has allocated the resulting goodwill to its three reporting units: Sand Dollar, Salty Dog, and Baytowne. Destin opts to skip the qualitative assessment and therefore performs a quantitative goodwill impairment review annually.

In its current year assessment of goodwill, Destin provides the following individual asset and liability values for each reporting unit:

Carrying Amounts Fair Values
Sand Dollar
Tangible assets $ 267,000 $ 285,900
Trademark 251,000 226,100
Customer list 136,500 155,400
Goodwill 183,050 ?
Liabilities (39,750 ) (39,750 )
Salty Dog
Tangible assets $ 265,000 $ 265,000
Unpatented technology 236,000 174,500
Licenses 134,500 148,400
Goodwill 193,700 ?
Baytowne
Tangible assets $ 203,250 $ 220,650
Unpatented technology 0 170,250
Copyrights 60,750 91,850
Goodwill 98,000 ?

The fair values for each reporting unit (including goodwill) are $781,400 for Sand Dollar, $789,900 for Salty Dog, and $712,750 for Baytowne. To date, Destin has reported no goodwill impairments.

How much goodwill impairment should Destin report this year?

Sand Dollar _________? ________?
Salty Dog _________? ________?
Baytowne _________? ________?

Solutions

Expert Solution

When goodwill of the company that acquired by another company
increase its fair value it is called goodwill impairment
Total fair value carrying value potential goodwill impairment
Sand dollor 781400 <797800 YES
Salty Dog 789900 <829200 YES
Baytowne 712750 >362000 NO
Sand dollor total fair value 781400
Fair value of identifiable net assets
Tangible assets 285900
trade marks 226100
customers list 155400
laibilities -39750 627650
implied value of goodwill 153750
carrying value of goodwill 183050
Impairment loss 29300
salty dog total fair value 789900
Fair value of identifiable net assets
Tangible assets 265000
unpatented technology 174500
licenses 148400 587900
implied value of goodwill 202000
carrying value of goodwill 193700
no impairment , implied value>carrying value

ekkarill92 answered 1 year ago
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