Concept explainers
Computation of Account Balances
Saspro Division is considered to be an individual reporting unit of Pabor Company. Pabor acquiredthe division by issuing 100,000 shares of its common stock with a market price of S7.60 each.Pabor’s management was able to identify assets with fair values of $810,000 and liabilities of $190,000 at the acquisition date. At the end of the first year, the fair value of the reporting entitywas estimated to be $930,000. On this date, Pabor’s accountants concluded that it must recognizea
Required
a. Determine the initial amount of goodwill recorded on the acquisition date. Show your computation.
b. If the carrying value of the reporting unit’s liabilities at the end of the period were $70,000,
what is the maximum carrying value of the reporting unit’s assets that would allow Paborto avoid recognizing a goodwill impairment? Show your computation.
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