In: Accounting
On January 1, 20X1, Porta Corporation purchased Swick Company’s
net assets and assigned goodwill of $80,900 to Reporting Division
K. The following assets and liabilities are assigned to Reporting
Division K on the acquisition date:
Carrying Amount | Fair Value | |||||
Cash | $ | 14,900 | $ | 14,900 | ||
Inventory | 56,900 | 71,900 | ||||
Equipment | 179,000 | 199,000 | ||||
Goodwill | 80,900 | |||||
Accounts Payable | 30,900 | 30,900 | ||||
Required:
On December 31, 20X3, Porta must test goodwill for impairment.
Determine the amount of goodwill to be reported for Division K and
the amount of goodwill impairment to be recognized, if any, if
Division K’s fair value is determined to be
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Part a | ||||
Total Carrying Amount | $300,800 | |||
Total Fair Value | $254,900 | |||
Division K Fair Value | $349,000 | |||
Goodwill will be reported | $ 80,900 | |||
(Since Fair value of K $349,000 is more than Carrying amount of $300,800) | ||||
Impairment | $ - | |||
(Since Fair value of K $349,000 is more than Carrying amount of $300,800) | ||||
Part b | ||||
Total Carrying Amount | A | $300,800 | ||
Total Fair Value | B | $254,900 | ||
Division K Fair Value | C | $289,000 | ||
Goodwill will be reported | C-B | $ 34,100 | ||
Impairment | $80,900-$34,100 | $ 46,800 | ||
Part c | ||||
Total Carrying Amount | A | $300,800 | ||
Total Fair Value | B | $254,900 | ||
Division K Fair Value | C | $269,000 | ||
Goodwill will be reported | C-B | $ 14,100 | ||
Impairment | $80,900-$14,100 | $ 66,800 |