On July 31, 2025, Wildhorse Company paid $2,850,000 to acquire all of the common stock of Conchita Incorporated, which became a division (a reporting unit) of Wildhorse. Conchita reported the following balance sheet at the time of the acquisition. Current assets $750,000 Current liabilities $600,000 Noncurrent assets 2,550,000 Long-term liabilities 500,000 Total assets $3,300,000 Stockholders' equity 2,200,000 Total liabilities and stockholders' equity $3,300,000 It was determined at the date of the purchase that the fair value of the identifiable net assets of Conchita was $2,640,000. Over the next 6 months of operations, the newly purchased division experienced operating losses. In addition, it now appears that it will generate substantial losses for the foreseeable future. At December 31, 2025, Conchita reports the following balance sheet information. Current assets $490,000 Noncurrent assets (including goodwill recognized in purchase) 2,540,000 Current liabilities (700,000) Long-term liabilities (500,000) Net assets $1,620,000 Finally, it is determined that the fair value of the Conchita Division is $1,850,000. (a) (b) (c) Assume that fair value of the Conchita Division is $1,764,000 instead of $1,850,000. Determine the impairment loss, if any, to be recorded on December 31, 2025. (If answer is zero, do not leave answer field blank. Enter for the amount.) The impairment loss $ eTextbook and Media List of Accounts Save for Later Attempts: 0 of 5 used Submit Answer (d) Prepare the journal entry to record the impairment loss, if any, and indicate where the loss would be reported in the income statement. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List debit entry before credit entry) Account Titles and Explanation Debit This loss will be reported in income as a separate line item before the subtotal Credit
On July 31, 2025, Wildhorse Company paid $2,850,000 to acquire all of the common stock of Conchita Incorporated, which became a division (a reporting unit) of Wildhorse. Conchita reported the following balance sheet at the time of the acquisition. Current assets $750,000 Current liabilities $600,000 Noncurrent assets 2,550,000 Long-term liabilities 500,000 Total assets $3,300,000 Stockholders' equity 2,200,000 Total liabilities and stockholders' equity $3,300,000 It was determined at the date of the purchase that the fair value of the identifiable net assets of Conchita was $2,640,000. Over the next 6 months of operations, the newly purchased division experienced operating losses. In addition, it now appears that it will generate substantial losses for the foreseeable future. At December 31, 2025, Conchita reports the following balance sheet information. Current assets $490,000 Noncurrent assets (including goodwill recognized in purchase) 2,540,000 Current liabilities (700,000) Long-term liabilities (500,000) Net assets $1,620,000 Finally, it is determined that the fair value of the Conchita Division is $1,850,000. (a) (b) (c) Assume that fair value of the Conchita Division is $1,764,000 instead of $1,850,000. Determine the impairment loss, if any, to be recorded on December 31, 2025. (If answer is zero, do not leave answer field blank. Enter for the amount.) The impairment loss $ eTextbook and Media List of Accounts Save for Later Attempts: 0 of 5 used Submit Answer (d) Prepare the journal entry to record the impairment loss, if any, and indicate where the loss would be reported in the income statement. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List debit entry before credit entry) Account Titles and Explanation Debit This loss will be reported in income as a separate line item before the subtotal Credit
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On July 31, 2025, Wildhorse Company paid $2,850,000 to acquire all of the common stock of Conchita Incorporated, which became a
division (a reporting unit) of Wildhorse. Conchita reported the following balance sheet at the time of the acquisition.
Current assets
$750,000
Current liabilities
$600,000
Noncurrent assets
2,550,000
Long-term liabilities
500,000
Total assets
$3,300,000
Stockholders' equity
2,200,000
Total liabilities and stockholders' equity
$3,300,000
It was determined at the date of the purchase that the fair value of the identifiable net assets of Conchita was $2,640,000. Over the
next 6 months of operations, the newly purchased division experienced operating losses. In addition, it now appears that it will
generate substantial losses for the foreseeable future. At December 31, 2025, Conchita reports the following balance sheet
information.
Current assets
$490,000
Noncurrent assets (including goodwill recognized in purchase)
2,540,000
Current liabilities
(700,000)
Long-term liabilities
(500,000)
Net assets
$1,620,000
Finally, it is determined that the fair value of the Conchita Division is $1,850,000.
(a)
(b)
(c)
Assume that fair value of the Conchita Division is $1,764,000 instead of $1,850,000. Determine the impairment loss, if any, to be
recorded on December 31, 2025. (If answer is zero, do not leave answer field blank. Enter for the amount.)
The impairment loss
$
eTextbook and Media
List of Accounts
Save for Later
Attempts: 0 of 5 used Submit Answer
(d)
Prepare the journal entry to record the impairment loss, if any, and indicate where the loss would be reported in the income
statement. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select
"No Entry" for the account titles and enter O for the amounts. List debit entry before credit entry)
Account Titles and Explanation
Debit
This loss will be reported in income as a separate line item before the subtotal
Credit
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