General Accounting Several years ago, a parent company acquired all of the outstandingcommon stock of its subsidiary for a purchase price of $275,000. On theacquisition date, this purchase price was $68,000 more than thesubsidiary's book value of Stockholders' Equity. The AAP was entirelyattributable to Goodwill. On the date of acquisition, the parent companymanagement believes that the goodwill only has a 10-year useful life.Since the date of acquisition, the subsidiary has reported a cumulativenet income of $234,000 and paid $97,000 of dividends to its parentcompany.Compute the balance of the Equity Investment account on the parent'sbalance sheet assuming that the Goodwill asset has not declined in valuesubsequent to the date of acquisition.

Step 1: Define Intangible AssetsIntangible assets generate benefits for the company for a long…

Answered: Several years ago, a parent company…

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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Several years ago, Blaha Company purchased Husker Company as a subsidiary. At that time, Blaha recorded goodwill of $100,000 related to the purchase. Since that timethe company has not considered the goodwill to be impaired. However, at the end of 2019, Blaha decides to evaluate the goodwill for impairment because of technological changes in the industry. Husker (which is considered a reporting unit of Blaha) has a book value (including the goodwill) of $800,000. Blaha estimates that the fair value of Husker is $720,000, of which it allocates $660,000 to Husker, identifiable assets and liabilities. 1. Prepare the journal entry (if any) for Blaha to record the impairment of its goodwill at the end of 2019. 2. Next Level Would any additional impairment be required? 3. Assume that Blaha uses IFRS and has estimated the recoverable amount of Husker (which qualifies as a cash-generating-unit) to be…

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