In 2018, Martin Corp. acquired Glynco and recorded goodwill of $100 million. Martin considers Glynco a...

In 2018, Martin Corp. acquired Glynco and recorded goodwill of $100 million. Martin considers Glynco a separate reporting unit. By the end of 2021, the net assets (including goodwill) of Glynco are $320 million and its estimated fair value is $260 million. The amount of the impairment loss that Martin would record for goodwill at the end of 2021 is:

Multiple Choice

$0.
$60 million.
$40 million.
$160 million.

Expert Solution

Impairment loss = Carrying value - fair value

= $320 - $260

= $60 million

The amount of the impairment loss that Martin would record for goodwill at the end of 2021 is = $60 million.

ekkarill92 answered 2 years ago

Jericho Company recently acquired three businesses, recognizing goodwill in each acquisition. The acquired goodwill was allocated...

Jericho Company recently acquired three businesses, recognizing goodwill in each acquisition. The acquired goodwill was allocated to the three reporting units: Apple, Banana, and Carrot. Jericho provides the following information in performing the 2012 annual review for impairment. Carrying Value Fair Value Valuation of Reporting Unit (Including Goodwill) Apple Tangible Assets $300,000 $320,000 $525,000 Trademarks 20,000 10,000 Licenses 85,000 90,000 Liabilities 20,000 20,000 Goodwill 130,000 ? Banana Tangible Assets $250,000 $400,000 $450,000 Trademarks 25,000 50,000 Licenses 18,000 18,000 Goodwill 140,000...

Problem 1: Goodwill and R.E. Calculations PRT acquired 100% of SUB’s ordinary shares on 1 January...

Problem 1: Goodwill and R.E. Calculations PRT acquired 100% of SUB’s ordinary shares on 1 January 2011 for $1,136,000 when SUB’s retained earnings were $260,000. At 1 January 2011 the fair value of the net assets of SUB exceeded their carrying value by $110,000. The remaining useful life of these assets was 11 years from acquisition. SUB has not issued any new shares since acquisition by PRT. SUB is PRT’s only subsidiary. PRT calculated that goodwill in its subsidiary was...

You acquired a building for $100 million and financed the acquisition with a $75 million interest-only...

You acquired a building for $100 million and financed the acquisition with a $75 million interest-only loan. Three years later, you sold the property for $120 million. Assume 70% of the property was attributed to structure and that the structure was depreciated over a 39-year period. Also assume that capital gains are taxed at 15% and that accumulated depreciation is taxed at 25%. Also assume a 3% sales cost for the building and no prepayment penalty for the loan. What...

Ayres Services acquired an asset for $96 million in 2018. The asset is depreciated for financial...

Ayres Services acquired an asset for $96 million in 2018. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). For tax purposes the asset’s cost is depreciated by MACRS. The enacted tax rate is 40%. Amounts for pretax accounting income, depreciation, and taxable income in 2018, 2019, 2020, and 2021 are as follows: ($ in millions) 2018 2019 2020 2021 are as ($ in millions) 2018 2019 2020 2021 Pretax accounting...

Ayres Services acquired an asset for $98 million in 2018. The asset is depreciated for financial...

Ayres Services acquired an asset for $98 million in 2018. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). For tax purposes the asset’s cost is depreciated by MACRS. The enacted tax rate is 40%. Amounts for pretax accounting income, depreciation, and taxable income in 2018, 2019, 2020, and 2021 are as follows: ($ in millions) 2018 2019 2020 2021 Pretax accounting income $375 395 410 445 Depreciation on the income...

Ayres Services acquired an asset for $86 million in 2018. The asset is depreciated for financial...

Ayres Services acquired an asset for $86 million in 2018. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). For tax purposes the asset’s cost is depreciated by MACRS. The enacted tax rate is 40%. Amounts for pretax accounting income, depreciation, and taxable income in 2018, 2019, 2020, and 2021 are as follows: ($ in millions) 2018 2019 2020 2021 Pretax accounting income $ 345 $ 365 $ 380 $ 415...

Tax Case 4 Goodwill Acquired in an Acquisition – Is it Deductible? As the CFO of...

Tax Case 4 Goodwill Acquired in an Acquisition – Is it Deductible? As the CFO of General Dynamo, you are very excited as you have just completed the negotiations related to the purchase of Apex Systems, a complimentary business to General Dynamo. The sole shareholder of Apex has agreed to either of the following purchase offers: A: General Dynamo will pay $10,000,000 for 100% of the outstanding stock of Apex OR B: General Dynamo will pay $11,000,000 for...

Paco Company acquired 100 percent of the stock of Garland Corp. on December 31, 20X8. The...

Paco Company acquired 100 percent of the stock of Garland Corp. on December 31, 20X8. The stockholder's equity section of Garland's balance sheet at that date is as follows: Common Stock $300,000 Additional Paid-In Capital 500,000 Retained Earnings 400,000 Total $1,200,000 Paco financed the acquisition by using $820,000 cash and giving a note payable for $400,000. Book value approximated fair value for all of Garland's assets and liabilities except for buildings which had a fair value $60,000 more than...

Martin Corp. had an unfavourable sales price variance of $5700 for 2009. Martin had budgeted for...

Martin Corp. had an unfavourable sales price variance of $5700 for 2009. Martin had budgeted for sales of 14 000 units at a sales price of $7 each. Actual sales in 2009 totalled 19 000 units. What was the actual sales price per unit? $6.70 $7.30 $5.55 $6.59 McCourt Inc. manufacturers a unique product. The company’s controller has prepared the following static budget for the month of February: Estimated production 300 units Direct labour per unit 1 hour Direct labour required for...

ABC Corp has net income of $75 million, total liabilities of $100 million, 45% of which...

ABC Corp has net income of $75 million, total liabilities of $100 million, 45% of which is interest-bearing debt at 8% interest. The ROE for XYZ is 15% and the tax rate is 25%. Find ABC’s ROA and ROIC.

Question