Alfonso Inc. acquired 100 percent of the voting shares of BelAire Company on January 1, 2020. In exchange, Alfonso paid $461,000 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 $15 per share. The combination is a statutory merger with BelAire subsequently dissolved as a legal corporation. BelAire's assets and liabilities are assigned to a new reporting unit. The following shows fair values for the BelAire reporting unit for January 1, 2020 along with respective carrying amounts on December 31, 2021. Fair Values Carrying Amounts BelAire Reporting Unit 1/1/20 89,000 189,750 218,750 776,500 586,000 355,000 12/31/21 2$ 48,000 243,000 258,000 860,000 546,000 269,000 452,000 (184,000) (518,000) Cash Receivables Inventory Patents Customer relationships Equipment (net) Goodwill Accounts payable Long-term liabilities (114,500) (591,500) Note: Parentheses indicate a credit balance. 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 $1,700,000. 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 $461,000 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 $15 per share. The combination is a statutory merger with BelAire subsequently dissolved as a legal corporation. BelAire's assets and liabilities are assigned to a new reporting unit. The following shows fair values for the BelAire reporting unit for January 1, 2020 along with respective carrying amounts on December 31, 2021. Fair Values Carrying Amounts BelAire Reporting Unit 1/1/20 89,000 189,750 218,750 776,500 586,000 355,000 12/31/21 2$ 48,000 243,000 258,000 860,000 546,000 269,000 452,000 (184,000) (518,000) Cash Receivables Inventory Patents Customer relationships Equipment (net) Goodwill Accounts payable Long-term liabilities (114,500) (591,500) Note: Parentheses indicate a credit balance. 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 $1,700,000. 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 $461,000 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.
TT
Fair Values
1/1/20
$
Carrying Amounts
BelAire Reporting Unit
Cash
12/31/21
$
89,000
189,750
218,750
776, 500
586,000
355,000
48,000
243,000
258,000
860,000
546,000
269,000
452,000
(184,000)
(518,000)
Receivables
Inventory
Patents
Customer relationships
Equipment (net)
Goodwill
Accounts payable
Long-term liabilities
(114,500)
(591,500)
Note: Parentheses indicate a credit balance.
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 $1,700,000. What amount of goodwill impairment, if any, should Alfonso recognize on its 2021
income statement?
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