Alfonso Inc. acquired 100 percent of the voting shares of BelAire Company on January 1, 2020. In exchange, Alfonso paid $198,000 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 Fair Values 1/1/20 S 65,000 203,000 275,000 531,000 580,000 215,000 ? (111,000 (460,000 ) ) Carrying Amounts 12/31/21 $ 40,000 235,000 250,000 550,000 450,000 335,000 400,000 (275,000 (425,000 ) ) 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. 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 $1,325,000. 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 $198,000 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 Fair Values 1/1/20 S 65,000 203,000 275,000 531,000 580,000 215,000 ? (111,000 (460,000 ) ) Carrying Amounts 12/31/21 $ 40,000 235,000 250,000 550,000 450,000 335,000 400,000 (275,000 (425,000 ) ) 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. 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 $1,325,000. 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:Alfonso Inc. acquired 100 percent of the voting shares of BelAire Company on January 1, 2020. In
exchange, Alfonso paid $198,000 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
Fair Values
1/1/20
S
65,000
203,000
275,000
531,000
580,000
215,000
?
(111,000
(460,000
)
)
Carrying Amounts
12/31/21
$
40,000
235,000
250,000
550,000
450,000
335,000
400,000
(275,000
(425,000
)
)
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.
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 $1,325,000. What amount of
goodwill impairment, if any, should Alfonso recognize on its 2021 income statement?
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