Destin Company recently acquired several businesses and recognized goodwill in each acquisition. Destin has allocated the resulting goodwill to its three reporting units: Sand Dollar, Salty Dog, and Baytowne. Destin opts to skip the qualitative assessment and therefore performs a quantitative goodwill impairment review annually. In its current year assessment of goodwill, Destin provides the following individual asset and liability values for each reporting unit: Carrying Amounts Fair Values Sand Dollar Tangible assets $ 242,000 $ 260,000 Trademark 216,000 191,600 Customer list 133,500 143,800 Goodwill 181,500 ? Liabilities (52,500 ) (52,500 ) Salty Dog Tangible assets $ 239,000 $ 239,000 Unpatented technology 249,000 195,750 Licenses 102,500 112,900 Goodwill 199,400 ? Baytowne Tangible assets $ 156,000 $ 174,300 Unpatented technology 0 165,750 Copyrights 50,750 83,850 Goodwill 101,500 ? The fair values for each reporting unit (including goodwill) are $697,400 for Sand Dollar, $753,650 for Salty Dog, and $689,900 for Baytowne. To date, Destin has reported no goodwill impairments. Determine which of Destin’s reporting units require both steps to test for goodwill impairment. How much goodwill impairment should Destin report this year?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Destin Company recently acquired several businesses and recognized goodwill in each acquisition. Destin has allocated the resulting goodwill to its three reporting units: Sand Dollar, Salty Dog, and Baytowne. Destin opts to skip the qualitative assessment and therefore performs a quantitative goodwill impairment review annually.

In its current year assessment of goodwill, Destin provides the following individual asset and liability values for each reporting unit:

	Carrying Amounts	Fair Values
Sand Dollar
Tangible assets	$	242,000		$	260,000
Trademark		216,000			191,600
Customer list		133,500			143,800
Goodwill		181,500			?
Liabilities		(52,500	)		(52,500	)
Salty Dog
Tangible assets	$	239,000		$	239,000
Unpatented technology		249,000			195,750
Licenses		102,500			112,900
Goodwill		199,400			?
Baytowne
Tangible assets	$	156,000		$	174,300
Unpatented technology		0			165,750
Copyrights		50,750			83,850
Goodwill		101,500			?

The fair values for each reporting unit (including goodwill) are $697,400 for Sand Dollar, $753,650 for Salty Dog, and $689,900 for Baytowne. To date, Destin has reported no goodwill impairments.

Determine which of Destin’s reporting units require both steps to test for goodwill impairment.
How much goodwill impairment should Destin report this year?

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