Intermediate Accounting
3rd Edition
ISBN: 9780136912644
Author: Elizabeth A. Gordon; Jana S. Raedy; Alexander J. Sannella
Publisher: Pearson Education (US)
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Question
Chapter 12, Problem 12.6BE
To determine
To explain: whether the
Given information:
Fair value of reporting unit including goodwill is $2,200,000.
Carrying cost for the reported goodwill is $800,000.
The book value of net asset excluding goodwill is $1,200,000.
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Destin Company recently acquired several businesses and recognized goodwill in each acquisition. Destin has allocated the resulting goodwill to its three reporting units: Sand Dollar, Salty Dog, and Baytowne. Destin opts to skip the qualitative assessment and therefore performs a quantitative goodwill impairment review annually.
In its current year assessment of goodwill, Destin provides the following individual asset and liability values for each reporting unit:
Carrying Amounts
Fair Values
Sand Dollar
Tangible assets
$
242,000
$
260,000
Trademark
216,000
191,600
Customer list
133,500
143,800
Goodwill
181,500
?
Liabilities
(52,500
)
(52,500
)
Salty Dog
Tangible assets
$
239,000
$
239,000
Unpatented technology
249,000
195,750
Licenses
102,500
112,900
Goodwill
199,400
?
Baytowne
Tangible assets
$
156,000
$
174,300
Unpatented technology
0
165,750…
Destin Company recently acquired several businesses and recognized goodwill in each acquisition. Destin has allocated the resulting goodwill to its three reporting units: Sand Dollar, Salty Dog, and Baytowne. Destin opts to skip the qualitative assessment and therefore performs a quantitative goodwill impairment review annually.In its current year assessment of goodwill, Destin provides the following individual asset and liability values for each reporting unit:The fair values for each reporting unit (including goodwill) are $510,000 for Sand Dollar, $580,000 for Salty Dog, and $560,000 for Baytowne. To date, Destin has reported no goodwill impairments.a. How much goodwill impairment should Destin report this year?b. What changes to the valuations of Destin’s tangible assets and identified intangible assets should be reported based on the goodwill impairment tests?
Pelota Company recently acquired several businesses and recognized goodwill in each acquisition. Pelota allocated the resulting goodwill to its three reporting units: R-one, R-two, and R-three. Pelota opts to skip the qualitative assessment and therefore performs a quantitative goodwill impairment review annually.
In its current-year assessment of goodwill, Pelota provides the following individual asset and liability carrying amounts for each of its reporting units:
Items
Carrying Amounts
R-one
R-two
R-three
Tangible assets
$241,000
$219,000
$159,000
Trademark
199,000
-
-
Computer software
148,500
-
-
Unpatented technology
-
232,000
-
Licenses
-
97,500
-
Copyrights
-
-
57,250
Goodwill
150,200
202,850
118,000
Liabilities
(32,250)
-
-
The total fair values for each reporting unit (including goodwill) are $682,350 for R-one, $709,300 for R-two, and $653,650 for R-three. To date, Pelota has reported no goodwill impairments.
Required:
How much goodwill impairment…
Chapter 12 Solutions
Intermediate Accounting
Ch. 12 - Prob. 12.1QCh. 12 - Can firms group all property, plant, and equipment...Ch. 12 - Prob. 12.3QCh. 12 - Prob. 12.4QCh. 12 - Do firms follow the same steps for impairment...Ch. 12 - Prob. 12.6QCh. 12 - Prob. 12.7QCh. 12 - Prob. 12.8QCh. 12 - Under IFRS, if a firm recovers an impairment loss...Ch. 12 - Under IFRS, when do firms test plant assets and...
Ch. 12 - Prob. 12.11QCh. 12 - Prob. 12.12QCh. 12 - Prob. 12.1MCCh. 12 - Prob. 12.2MCCh. 12 - Prob. 12.3MCCh. 12 - Prob. 12.4MCCh. 12 - Prob. 12.5MCCh. 12 - Prob. 12.6MCCh. 12 - Prob. 12.1BECh. 12 - Prob. 12.2BECh. 12 - Prob. 12.3BECh. 12 - Prob. 12.4BECh. 12 - Indefinite-Life Intangible Asset Impairment....Ch. 12 - Prob. 12.6BECh. 12 - Prob. 12.7BECh. 12 - Prob. 12.8BECh. 12 - Prob. 12.9BECh. 12 - Prob. 12.10BECh. 12 - Prob. 12.11BECh. 12 - Prob. 12.12BECh. 12 - Prob. 12.13BECh. 12 - Prob. 12.14BECh. 12 - Prob. 12.15BECh. 12 - Prob. 12.16BECh. 12 - Prob. 12.17BECh. 12 - Prob. 12.18BECh. 12 - Prob. 12.19BECh. 12 - Prob. 12.20BECh. 12 - Prob. 12.21BECh. 12 - Prob. 12.22BECh. 12 - Prob. 12.23BECh. 12 - Tangible Asset Impairment. Henne Optical...Ch. 12 - Tangible Asset Impairment Loss. Use the same...Ch. 12 - Prob. 12.3ECh. 12 - Prob. 12.4ECh. 12 - Prob. 12.5ECh. 12 - Tangible Asset Impairment Loss, IFRS. Use the same...Ch. 12 - Prob. 12.7ECh. 12 - Prob. 12.8ECh. 12 - Prob. 12.9ECh. 12 - Assets Held for Disposal. Hattie Corporation...Ch. 12 - Prob. 12.11ECh. 12 - Asset Revaluation, Downwards, IFRS. Lousa Company...Ch. 12 - Tangible Asset Impairment. Chrispian Cookies, Inc....Ch. 12 - Prob. 12.2PCh. 12 - Tangible Asset Impairment. Using the same...Ch. 12 - Prob. 12.4PCh. 12 - Goodwill Impairment, Tangible Fixed Assets, and...Ch. 12 - Tangible Asset Impairment, Potential Reversal,...Ch. 12 - Prob. 12.7PCh. 12 - Prob. 12.8PCh. 12 - Prob. 12.9PCh. 12 - Comprehensive Asset Revaluation Problem (Initial...Ch. 12 - Prob. 12.11PCh. 12 - Judgment Case 1: Impairments of PPE under IFRS...Ch. 12 - Prob. 2JCCh. 12 - Prob. 3JCCh. 12 - Financial Statement Analysis Case 1: Long-Lived...Ch. 12 - Surfing the Standards Case 1: Impairments of PPE...Ch. 12 - Prob. 2SSCCh. 12 - Prob. 1BCCCh. 12 - Basis for Conclusions Case 2: Intangible Assets ...Ch. 12 - Basis for Conclusions Case 3: Goodwill Impairment...
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- Purchase Company recently acquired several businesses and recognized goodwill in each acquisition. Purchase has allocated the resulting goodwill to its three reporting units: RU-1, RU-2, and RU-3. Purchase opts to skip the qualitative assessment and therefore performs a quantitative goodwill impairment review annually. In its current-year assessment of goodwill, Purchase provides the following individual asset and liability carrying amounts for each of its reporting units: Carrying Amounts RU-1 RU-2 RU-3 Tangible assets $224,000 $288,000 $202,000 Trademark 198,000 Customer list 116,250 Unpatented technology 175,000 Licenses 137,500 Copyrights 52,000 Goodwill 164,800 232,050 91,500 Liabilities (43,000) The total fair values for each reporting unit (including goodwill) are $645,450 for RU-1, $790,400 for RU-2, and $671,850 for RU-3. To date, Purchase has reported no goodwill impairments. How much goodwill impairment should…arrow_forwardPurchase Company recently acquired several businesses and recognized goodwill in each acquisition. Purchase has allocated the resulting goodwill to its three reporting units: RU-1, RU-2, and RU-3. Purchase opts to skip the qualitative assessment and therefore performs a quantitative goodwill impairment review annually. In its current-year assessment of goodwill, Purchase provides the following individual asset and liability carrying amounts for each of its reporting units: Carrying Amounts RU-1 RU-2 RU-3 Tangible assets $214,000 $295,000 $207,750 Trademark 192,000 Customer list 110,250 Unpatented technology 183,000 Licenses 94,000 Copyrights 67,500 Goodwill 173,200 201,250 135,000 Liabilities (51,250) The total fair values for each reporting unit (including goodwill) are $613,000 for RU-1, $748,800 for RU-2, and $739,200 for RU-3. To date, Purchase has reported no goodwill impairments. How much goodwill impairment should…arrow_forwardIn which of the following situations would Martinez Indus-tries include goodwill in its balance sheet? a. The fair market value of Martinez’s net identifiableassets amounts to $2,000,000. Normal earnings for thisindustry are 15 percent of net identifiable assets. Netincome for the past five years has averaged $390,000.b. Martinez spent $800,000 during the current year for research and development for a new product that prom-ises to generate substantial revenue for at least 10 years. c. Martinez acquired Baxter Electronics at a price in excess ofthe fair market value of Baxter’s net identifiable assets. d. A buyer wishing to purchase Martinez’s entire opera-tion has offered a price in excess of the fair market value of the company’s net identifiable assets.arrow_forward
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