Required: Determine the amount of goodwill impairment, if any, that should be recognized at December 31, 20X4, if the fair value of the Plastic reporting =unit is determined to be | a. b. 2 c. 3 4 Rubber Corporation acquired all of the common stock of Plastic Company for $450,000 on January 1, 20X4. On that date, Plastic's identifiable net assets had a fair value of $390,000. The assets acquired in the purchase of Plastic are considered to be a separate reporting unit of Rubber. The carrying value of the Plastic reporting unit's net assets at December 31, 20X4, is $500,000. 5 a. 5 b. D 7 c. B 9 Step 1: For Goodwill Impairment Testing 1 a. 2 b. 3 с. 5 530000 485000 450000 Goodwill Impairment 60000 7 a. B b. e c. D Fair Value of Reporting Unit Carrying Value of Reporting Unit 4 5 Step 2: For Goodwill Impairment Testing V Fair Value of Fair Value of Reporting Indentifiable Unit Assets Fair Value - Carrying Value ▼ Impairment Indicated (Yes/No) No Yes Yes Implied Fair Value of Book Value of Goodwill Goodwill Fair Value vs. Book Impairment Reported Value (Yes/No) Goodwill No Yes Yes Y ▼ T

Required: Determine the amount of goodwill impairment, if any, that should be recognized at December 31, 20X4, if the fair value of the Plastic reporting =unit is determined to be | a. b. 2 c. 3 4 Rubber Corporation acquired all of the common stock of Plastic Company for $450,000 on January 1, 20X4. On that date, Plastic's identifiable net assets had a fair value of $390,000. The assets acquired in the purchase of Plastic are considered to be a separate reporting unit of Rubber. The carrying value of the Plastic reporting unit's net assets at December 31, 20X4, is $500,000. 5 a. 5 b. D 7 c. B 9 Step 1: For Goodwill Impairment Testing 1 a. 2 b. 3 с. 5 530000 485000 450000 Goodwill Impairment 60000 7 a. B b. e c. D Fair Value of Reporting Unit Carrying Value of Reporting Unit 4 5 Step 2: For Goodwill Impairment Testing V Fair Value of Fair Value of Reporting Indentifiable Unit Assets Fair Value - Carrying Value ▼ Impairment Indicated (Yes/No) No Yes Yes Implied Fair Value of Book Value of Goodwill Goodwill Fair Value vs. Book Impairment Reported Value (Yes/No) Goodwill No Yes Yes Y ▼ T

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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Question

100%

H~3&500
1
2
4
6
Required:
Determine the amount of goodwill impairment, if any, that should be recognized at December 31, 20X4, if the fair value of the Plastic reporting
8 unit is determined to be
9
10 a.
11 b.
12 c.
13
14
7
Rubber Corporation acquired all of the common stock of Plastic Company for $450,000 on January 1, 20X4. On that date, Plastic's identifiable net assets had a fair
value of $390,000. The assets acquired in the purchase of Plastic are considered to be a separate reporting unit of Rubber. The carrying value of the Plastic reporting
unit's net assets at December 31, 20X4, is $500,000.
20
15 a.
16
b.
17 C.
18
19 Step 1: For Goodwill Impairment Testing
26
530000
485000
450000
27
28
29 C.
30
31
Goodwill
Impairment
60000
a.
b.
Fair Value of
Reporting
Unit
21 a.
22
b.
23 C.
24
25 Step 2: For Goodwill Impairment Testing
Carrying
Value of
Reporting
Unit
Fair Value -
Carrying
Value
Fair Value of Fair Value of
Reporting Indentifiable
Unit
Assets
Impairment
Indicated
(Yes/No)
No
Yes
Yes
Fair Value
Implied Fair
Value of Book Value of vs. Book Impairment Reported
Goodwill Goodwill Value (Yes/No) Goodwill
No
Yes
Yes
▼

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Snowy Ltd acquires Pax Ltd on 1 July 2018 for $5,000,000 being the fair value of the consideration transferred. At that date, Pax Ltd’s net identifiable assets have a fair value of $4,400,000. Goodwill of $600,000 is therefore the difference between the aggregate of the consideration transferred and the net identifiable assets acquired.The fair value of the net identifiable assets of Pax Limited are determined as follows: ($000) Patent rights 200 Machinery 1,000 Buildings 1,500 Land 2,300 5,000 Less: Bank loan 600 Net assets 4,400 At the end of the reporting period of 30 June 2019, the management of Snowy Ltd determines that the recoverable amount of the cash-generating unit, which is considered to be Pax Ltd, totals $4,500,000. The carrying amount of the net identifiable assets of Pax Ltd, excluding goodwill, is unchanged and remains at $4,400,000.Required: a) Prepare the journal entry to account for any impairment of goodwill b) Assume instead that at the end of the reporting period…