Alfonso Inc. acquired 100 percent of the voting shares of BelAire Company on January 1, 2020. In exchange, Alfonso paid $263,500 in cash and issued 100,000 shares of its own $1 par value common stock. On this date, Alfonso's stock had a fair value of $15 per share. The combination is a statutory merger with BelAire subsequently dissolved as a legal corporation. BelAire's assets and liabilities are assigned to a new reporting unit. The following shows fair values for the BelAire reporting unit for January 1, 2020 along with respective carrying amounts on December 31, 2021. BelAire Reporting Unit Cash Receivables Inventory Patents Customer relationships Equipment (net) Goodwill Accounts payable Long-term liabilities Note: Parentheses indicate a credit balance. Fair Values 1/1/20 68,000 182,500 $ 219,000 371,500 603,500 404,500 ? (123,500) (524,000) Carrying Amounts $ 12/31/21 41,000 236,000 251,000 467,000 574,000 339,000 562,000 (188,000) (452,000) a. Prepare Alfonso's journal entry to record the assets acquired and the liabilities assumed in the BelAire merger on January 1, 2020. Note: Enter cash paid and cash received as two separate amounts. b. On December 31, 2021, Alfonso opts to forgo any goodwill impairment qualitative assessment and estimates that the total fair value of the entire BelAire reporting unit is $1,335,000. What amount of goodwill impairment, if any, should Alfonso recognize on its 2021 income statement?
Alfonso Inc. acquired 100 percent of the voting shares of BelAire Company on January 1, 2020. In exchange, Alfonso paid $263,500 in cash and issued 100,000 shares of its own $1 par value common stock. On this date, Alfonso's stock had a fair value of $15 per share. The combination is a statutory merger with BelAire subsequently dissolved as a legal corporation. BelAire's assets and liabilities are assigned to a new reporting unit. The following shows fair values for the BelAire reporting unit for January 1, 2020 along with respective carrying amounts on December 31, 2021. BelAire Reporting Unit Cash Receivables Inventory Patents Customer relationships Equipment (net) Goodwill Accounts payable Long-term liabilities Note: Parentheses indicate a credit balance. Fair Values 1/1/20 68,000 182,500 $ 219,000 371,500 603,500 404,500 ? (123,500) (524,000) Carrying Amounts $ 12/31/21 41,000 236,000 251,000 467,000 574,000 339,000 562,000 (188,000) (452,000) a. Prepare Alfonso's journal entry to record the assets acquired and the liabilities assumed in the BelAire merger on January 1, 2020. Note: Enter cash paid and cash received as two separate amounts. b. On December 31, 2021, Alfonso opts to forgo any goodwill impairment qualitative assessment and estimates that the total fair value of the entire BelAire reporting unit is $1,335,000. What amount of goodwill impairment, if any, should Alfonso recognize on its 2021 income statement?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:a. Prepare Alfonso's journal entry to record the assets acquired and the liabilities assumed in the BelAire merger on January 1, 2020.
Note: Enter cash paid and cash received as two separate amounts.
b. On December 31, 2021, Alfonso opts to forgo any goodwill impairment qualitative assessment and estimates that the total fair value
of the entire BelAire reporting unit is $1,335,000. What amount of goodwill impairment, if any, should Alfonso recognize on its 2021
income statement?
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> Answer is complete but not entirely correct.
On December 31, 2021, Alfonso opts to forgo any goodwill impairment qualitative assessment and estimates that the total
fair value of the entire BelAire reporting unit is $1,335,000. What amount of goodwill impairment, if any, should Alfonso
recognize on its 2021 income statement?
Goodwill impairment loss
$ 534,000
Transcribed Image Text:Alfonso Inc. acquired 100 percent of the voting shares of BelAire Company on January 1, 2020. In exchange, Alfonso paid $263,500 in
cash and issued 100,000 shares of its own $1 par value common stock. On this date, Alfonso's stock had a fair value of $15 per share.
The combination is a statutory merger with BelAire subsequently dissolved as a legal corporation. BelAire's assets and liabilities are
assigned to a new reporting unit.
The following shows fair values for the BelAire reporting unit for January 1, 2020 along with respective carrying amounts on December
31, 2021.
BelAire Reporting Unit
Cash
Receivables
Inventory
Patents
Customer relationships
Equipment (net)
Goodwill
Accounts payable
Long-term liabilities
Note: Parentheses indicate credit balance.
Fair Values
1/1/20
68,000
182,500
219,000
$
371,500
603,500
404,500
?
(123,500)
(524,000)
Carrying Amounts
$
12/31/21
41,000
236,000
251,000
467,000
574,000
339,000
562,000
(188,000)
(452,000)
a. Prepare Alfonso's journal entry to record the assets acquired and the liabilities assumed in the BelAire merger on January 1, 2020.
Note: Enter cash paid and cash received as two separate amounts.
b. On December 31, 2021, Alfonso opts to forgo any goodwill impairment qualitative assessment and estimates that the total fair value
of the entire BelAire reporting unit is $1,335,000. What amount of goodwill impairment, if any, should Alfonso recognize on its 2021
income statement?
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