On January 1, Year 1, East Company purchased West Company. East Company paid $670,000 cash and assumed all of West Company's liabilities. West's books showed tangible assets of $578,000, liabilities of $54,000, and equity of $632,000. An appraiser assessed the fair market value of the tangible assets at $622,000 at the date of acquisition. On December 31, Year 4, East determines that the goodwill suffered a $32,000 permanent impairment. However, on December 31, Year 6, East estimated that it had recovered $12,000 of the impairment that had previously been considered to be a permanent impairment. Based on this information, the book value of the goodwill shown on the December 31, Year 6 balance sheet is:**Multiple Choice**- ○ $102,000.- ○ $134,000.- ○ $54,000.- ○ $70,000.

Answered: On January 1, Year 1, East Company…

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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On January 1, Year 1, East Company purchased West Company. East Company paid $670,000 cash and assumed all of West Company's liabilities. West's books showed tangible assets of $578,000, liabilities of $54,000, and equity of $632,000. An appraiser assessed the fair market value of the tangible assets at $622,000 at the date of acquisition. On December 31, Year 4, East determines that the goodwill suffered a $32,000 permanent impairment. However, on December 31, Year 6, East estimated that it had recovered $12,000 of the impairment that had previously been considered to be a permanent impairment. Based on this information, the book value of the goodwill shown on the December 31, Year 6 balance sheet is:

**Multiple Choice**

- ○ $102,000.
- ○ $134,000.
- ○ $54,000.
- ○ $70,000.

Expert Solution

Step 1: Introduction

Goodwill reflects non-individually identifiable or separable characteristics such as the acquired company's reputation, brand value, customer connections, staff morale, and strategic benefits deriving from the purchase. It symbolizes the synergy and value generated by the two companies' union, which is frequently intangible but may be a crucial component of a company's total worth.

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