On May 31, 2021, Oriole Company paid $3,675,000 to acquire all of the common stock of Pharoah Corporation, which became a division of Oriole. Pharoah reported the following balance sheet at the time of the acquisition:Current assets $ 945,000 Current liabilities $ 630,000Noncurrent assets 2,835,000 Long-term liabilities 525,000 Stockholder's equity 2,625,000Total assets $3,780,000 Total liabilities and stockholder's equity $3,780,000It was determined at the date of the purchase that the fair value of the identifiable net assets of Pharoah was $3,255,000. At December 31, 2021, Pharoah reports the following balance sheet information:Current assets $ 840,000 Noncurrent assets (including goodwill recognized in purchase) 2,520,000 Current liabilities (735,000) Long-term liabilities (525,000) Net assets $2,100,000 It is determined that the fair value of the Pharoah division is $2,310,000. Determine the impairment loss, if any, to be recorded on December 31, 2021.Impairment loss Assume that the fair value of the Pharoah division is $2,047,500 instead of $2,310,000. Prepare the journal entry to record the impairment loss, if any, on December 31, 2021. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Impairment Loss is the excess value of the carrying amount in the books over the fair value of the…

Answered: Determine the impairment loss, if any,…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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On May 31, 2021, Oriole Company paid $3,675,000 to acquire all of the common stock of Pharoah Corporation, which became a division of Oriole. Pharoah reported the following balance sheet at the time of the acquisition:

Current assets	$ 945,000	Current liabilities	$ 630,000
Noncurrent assets	2,835,000	Long-term liabilities	525,000
		Stockholder's equity	2,625,000
Total assets	$3,780,000	Total liabilities and stockholder's equity	$3,780,000

It was determined at the date of the purchase that the fair value of the identifiable net assets of Pharoah was $3,255,000. At December 31, 2021, Pharoah reports the following balance sheet information:

Current assets	$ 840,000
Noncurrent assets (including goodwill recognized in purchase)	2,520,000
Current liabilities	(735,000	)
Long-term liabilities	(525,000	)
Net assets	$2,100,000

It is determined that the fair value of the Pharoah division is $2,310,000.

Determine the impairment loss, if any, to be recorded on December 31, 2021.

Impairment loss

Assume that the fair value of the Pharoah division is $2,047,500 instead of $2,310,000. Prepare the journal entry to record the impairment loss, if any, on December 31, 2021. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

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