On May 31, 2021, Ivanhoe Company paid $3,640,000 to acquire all of the common stock of Oriole Corporation, which became a division of Ivanhoe. Oriole reported the following balance sheet at the time of the acquisition: Current assets $ 936,000 Current liabilities $ 624,000 Noncurrent assets 2,808,000 Long-term liabilities 520,000 Stockholder's equity 2,600,000 Total assets $3,744,000 Total liabilities and stockholder's equity $3,744,000 It was determined at the date of the purchase that the fair value of the identifiable net assets of Oriole was $3,224,000. At December 31, 2021, Oriole reports the following balance sheet information: Current assets $ 832,000 Noncurrent assets (including goodwill recognized in purchase) 2,496,000 Current liabilities (728,000 ) Long-term liabilities (520,000 ) Net assets $2,080,000 It is determined that the fair value of the Oriole division is $2,288,000. 1). Compute the amount of goodwill recognized, if any, on May 31, 2021. 2) Determine the impairment loss, if any, to be recorded on December 31, 2021. 3). Assume that the fair value of the Oriole division is $2,028,000 instead of $2,288,000. Prepare the journal entry to record the impairment loss, if any, on December 31, 2021.

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 May 31, 2021, Ivanhoe Company paid $3,640,000 to acquire all of the common stock of Oriole Corporation, which became a division of Ivanhoe. Oriole reported the following balance sheet at the time of the acquisition:

Current assets	$ 936,000	Current liabilities	$ 624,000
Noncurrent assets	2,808,000	Long-term liabilities	520,000
		Stockholder's equity	2,600,000
Total assets	$3,744,000	Total liabilities and stockholder's equity	$3,744,000

It was determined at the date of the purchase that the fair value of the identifiable net assets of Oriole was $3,224,000. At December 31, 2021, Oriole reports the following balance sheet information:

Current assets	$ 832,000
Noncurrent assets (including goodwill recognized in purchase)	2,496,000
Current liabilities	(728,000	)
Long-term liabilities	(520,000	)
Net assets	$2,080,000

It is determined that the fair value of the Oriole division is $2,288,000.

1). Compute the amount of goodwill recognized, if any, on May 31, 2021.

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

3). Assume that the fair value of the Oriole division is $2,028,000 instead of $2,288,000. Prepare the journal entry to record the impairment loss, if any, on December 31, 2021.

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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