Question

1. Information has been collected regarding Black Company's asset group that includes Goodwill. Black company follows ASPE. At December 31st, 2015, the assets of the Black company's asset group are shown as follows (in millions of dollars) on the company's balance sheet:

	Cost	Accumulated Depreciation	Net Book Value
Current Assets	$300	n/a	300
Goodwill	$400	n/a	400
Equipment	$1,400	800	600
Buildings	$2,100	600	1,500
Patent Rights	$200	80	$120
TOTAL ASSETS	$4,400	$1,480	$2,920
Liabilities	($520)		($520)

The fair values/recoverable amounts of the individual identifiable assets and liabilities are shown below (note the exclusion of the Goodwill from above since Goodwill is not identifiable):

Current Assets	$300
Customer Lists	$500 (previously unidentified)
Equipment	$250
Buildings	$1,000
Patent Rights	$200
Liabilities	($520)

The value of the asset group as a whole is $1.9 million, while estimated selling costs are $100,000.

Required:

1. Prepare the journal entries to record the impairment of Goodwill as well as any other assets under ASPE.

*Please explain with step by step calculations.

Answer 1

answer :

Impairment loss	820
	Goodwill		400
	Accumulated depreciation - machinery		113
	Accumulated depreciation – buildings		286
	Accumulated amortization – patent rights		21

explanation:

Asset	NBV	percentage	assigned of impairment loss	Adjusted carrying value
Goodwill	400		400	0
machinery	600	27%	113	487
Buildings	1,500	68%	286	1,214
Patent rights	120	5%	21	99
	$ 2,220*	100%	$ 820	$ 1,800

Aforementioned impairment crash is chiefly assigned to goodwill. Following, some remaining cash is assigned to the additional assets on proportionate assistance. The whole nbv reduces the NBV of goodwill as here is not included for the allocation of the failure. If there is a denial of impairment the goodwill amount would not be replaced. The cost of the goodwill would hold at 0. It is simply for the extra assets that the impairment would imply returned.