Question 5 On May 31, 2023, Rooney Company paid $2,100,000 to purchase Frances Corporation, which became a division of Rooney. Frances reported the following balance sheet at the time of the acquisition: Current assets Noncurrent assets $ 500,000 1.800.000 Current liabilities Long-term liabilities Stockholders' equity Total liabilities and $ 400,000 300,000 1.600.000 Total assets $2.300.000 $2.300.000 It was determined at the date of the purchase that the fair value of the identifiable net assets of Frances was $1,800,000. At December 31, 2023, Frances reports the following balance sheet information: stockholders' equity $ 400,000 1,600,000 Current assets Noncurrent assets (including goodwill recognized in purchase) Current liabilities (500,000) Long-term liabilities (300.000) Net assets $1.200.000 It is determined that the fair market value of the Frances division is $1,250,000 at this time. Instructions a. Compute the amount of goodwill recognized, if any, on May 31, 2023. b. Determine the impairment loss, if any, to be recorded on December 31, 2023. c. Assume that the fair value of the Frances division is $1,100,000 instead of $1,250,000. Prepare the journal entry to record the impairment loss, if any, on December 31, 2023.
Question 5 On May 31, 2023, Rooney Company paid $2,100,000 to purchase Frances Corporation, which became a division of Rooney. Frances reported the following balance sheet at the time of the acquisition: Current assets Noncurrent assets $ 500,000 1.800.000 Current liabilities Long-term liabilities Stockholders' equity Total liabilities and $ 400,000 300,000 1.600.000 Total assets $2.300.000 $2.300.000 It was determined at the date of the purchase that the fair value of the identifiable net assets of Frances was $1,800,000. At December 31, 2023, Frances reports the following balance sheet information: stockholders' equity $ 400,000 1,600,000 Current assets Noncurrent assets (including goodwill recognized in purchase) Current liabilities (500,000) Long-term liabilities (300.000) Net assets $1.200.000 It is determined that the fair market value of the Frances division is $1,250,000 at this time. Instructions a. Compute the amount of goodwill recognized, if any, on May 31, 2023. b. Determine the impairment loss, if any, to be recorded on December 31, 2023. c. Assume that the fair value of the Frances division is $1,100,000 instead of $1,250,000. Prepare the journal entry to record the impairment loss, if any, on December 31, 2023.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Question 5
On May 31, 2023, Rooney Company paid $2,100,000 to purchase Frances Corporation, which
became a division of Rooney. Frances reported the following balance sheet at the time of the
acquisition:
Current assets
Noncurrent assets
$ 500,000
1.800.000
Current liabilities
Long-term liabilities
Stockholders' equity
Total liabilities and
$ 400,000
300,000
1,600,000
Total assets
$2.300.000
$2,300,000
It was determined at the date of the purchase that the fair value of the identifiable net assets of
Frances was $1,800,000. At December 31, 2023, Frances reports the following balance sheet
information:
stockholders' equity
$ 400,000
1,600,000
Current assets
Noncurrent assets (including goodwill recognized in purchase)
Current liabilities
(500,000)
(300,000)
Long-term liabilities
Net assets
$1.200.000
It is determined that the fair market value of the Frances division is $1,250,000 at this time.
Instructions
a. Compute the amount of goodwill recognized, if any, on May 31, 2023.
b. Determine the impairment loss, if any, to be recorded on December 31, 2023.
c. Assume that the fair value of the Frances division is $1,100,000 instead of $1,250,000.
Prepare the journal entry to record the impairment loss, if any, on December 31, 2023.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 5 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education