On May 31, 2020, Roddick Company paid $3,400,000 to acquire all of the ordinary shares of Bolt Corporation, which became a division of Roddick. Bolt reported the following statement of financial position at the time of the acquisition: Equity $2,500,000 Non-current assets $2,700,000 Non-current liabilities 500,000 Current assets 900,000 Current liabilities 600,000 Total assets $3,600,000 Total equity and liabilities $3,600,000 It was determined at the date of the purchase that the fair value of the identifiable net assets of Bolt was $2,800,000. On December 31, 2020, Bolt reports the following statement of financial position information: Current assets $ 800,000 Non-current assets (including goodwill recognized in purchase) 2,400,000 Current liabilities (700,000) Non-current liabilities (500,000) Net assets $2,000,000 It is determined that the recoverable amount value of the Bolt Division is $2,100,000. Required i. Compute the amount of goodwill recognized, if any, on May 31, 2020. ii. Prepare the journal entry to record the impairment loss, if any, on December 31, 2020 and justify your answer.
D.
On May 31, 2020, Roddick Company paid $3,400,000 to acquire all of the ordinary shares of Bolt Corporation, which became a division of Roddick. Bolt reported the following
|
|
|
Equity |
$2,500,000 |
|
Non-current assets |
$2,700,000 |
Non-current liabilities |
500,000 |
|
Current assets |
900,000 |
Current liabilities |
600,000 |
|
Total assets |
$3,600,000 |
Total equity and liabilities |
$3,600,000 |
It was determined at the date of the purchase that the fair value of the identifiable net assets of Bolt was $2,800,000. On December 31, 2020, Bolt reports the following statement of financial position information:
|
Current assets |
$ 800,000 |
|
Non-current assets (including |
2,400,000 |
|
Current liabilities |
(700,000) |
|
Non-current liabilities |
(500,000) |
|
Net assets |
$2,000,000 |
It is determined that the recoverable amount value of the Bolt Division is $2,100,000.
Required
i. Compute the amount of goodwill recognized, if any, on May 31, 2020.
ii. Prepare the
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