Advanced Accounting
14th Edition
ISBN: 9781260247824
Author: Joe Ben Hoyle, Thomas F. Schaefer, Timothy S. Doupnik
Publisher: RENT MCG
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Question
Chapter 3, Problem 18P
To determine
Introduction:
The amount of goodwill impairment reported for this year for each reporting unit.
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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: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?
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…
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
$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…
Chapter 3 Solutions
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- 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 Tangible assets Trademark Computer software Unpatented technology Licenses Copyrights Goodwill Liabilities Carrying Amounts R-one $215,500 257,000 154,500 Goodwill impairment loss 190, 250 (35,000) R-two $261,000 R-one 232,500 100,000 187,550 The total fair values for each reporting unit (including goodwill) are $773,950 for R-one, $736,450 for R-two, and $743,500 for R-three. date, Pelota has reported no goodwill impairments. R-three $158, 250 Required: How much goodwill impairment should Pelota report this year for…arrow_forwardDestin 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…arrow_forwardDetermine whether there is any goodwill impairment and if so please calculate the goodwill impairment loss. On the date of acquisition, the following information is available: Fair Value of the reporting unit is $720,000 Fair Value of identifiable net assets $601,000 Goodwill $119,000 One year later at the first periodic review date the following information is available: Fair value of the reporting unit is $788,000 Carrying value of the reporting unit (includes goodwill) $889,000 Fair Value of identifiable net assets $766,000 $22,000arrow_forward
- 1arrow_forwardFollowing is information about the reporting unit of Y company as of 12/31/19 The fair value of the reporting unit of Y company is $310,000 and the fair value of identifiable net assets excluding goodwill is $270,000. The total carrying value of the unit is $320,000. The carrying value of identifiable net assets excluding goodwill is $260,000. The carrying value of goodwill is $60,000. Required: compute the goodwill impairment loss if any for 2019. Show work $10,000 $20.000 $40,000 $0arrow_forwardGroup Ccc-Three Ltd has identified its non-current assets consist of three classes: goodwill, land and plant.Details of items included in each class appear below.GoodwillTotal goodwill is $580,000 and no impairments have previously been recorded.$300,000 of this total relates to the purchase of Company F on 1 February 2020. The estimated fair valueof this goodwill at 30 June 2021 is $350,000.The remaining $280,000 of the total goodwill relates to the purchase of Company G on 1 January 2021.The estimated recoverable amount of this goodwill at 30 June 2021 is $250,000.LandLand was acquired on 1 June 2016 for $2,100,000. The estimated market value of the land at 30 June2021 is $2,600,000. However, if the land was sold, disposal costs of $90,000 would be incurred.PlantPlant was originally acquired for $270,000 on 1 September 2017. When purchased, the plant wasconsidered to have a nil residual value and a 10 year useful life for both accounting and tax purposes.The estimated market value of…arrow_forward
- On January 1, 2018, Paye Company purchased Che Company at a cost that resulted in recognition of goodwill of P 2 000 000. During the first quarter of 2018 Paye Company spent an additional P 800 000 on expenditures designed to develop and maintain goodwill by training and hiring new employees. Due to these expenditures, on December 31, 2018, Paye Company Estimated the benefit period of goodwill was indefinite. On December 31, 2018, what amount should be reported as goodwill?arrow_forwardSimon Company determines that its goodwill is impaired. It finds that the book value of its reporting unit is $1,490,000, including recorded goodwill of $400,000. The fair value of the identifiable assets of the reporting unit is $1,450,000. What is the amount of goodwill impaired?arrow_forwardOn December 31, an entity had a reporting unit that had a book value of $3,450,000, including goodwillof $225,000. As part of its annual review of goodwill impairment, the entity determined that the fair value of the reporting unit was $3,310,000. The entity assigned $3,170,000 of the reporting units fair value to its assets and liabilities other than goodwill. What is the goodwill impairment loss to be reported on December 31 under the new standardarrow_forward
- In 2014, Alliant Corporation acquired Centerpoint Inc. for $300 million, of which $50 million was allocated to goodwill. At the end of 2016, management has provided the following information for a required goodwill impairment test: Fair value of Centerpoint, Inc. $220 million Fair value of Centerpoint’s net assets (excluding goodwill) 200 million Book value of Centerpoint’s net assets (including goodwill) 250 million Required: 1. Determine the amount of the impairment loss. 2. Repeat requirement 1 assuming that the fair value of Centerpoint is $270 million.arrow_forwardAlomar Co., a consolidated enterprise, conducted an impairment review for each of its reporting units. In its qualitative assessment, one particular reporting unit, Sellers, emerged as a candidate for possible goodwill impairment. Sellers has recognized net assets of $1,094, including goodwill of $755. Seller's fair value is assessed at $1,028 and includes two internally developed unrecog- nized intangible assets (a patent and a customer list with fair values of $199 and $56, respectively). The following table summarizes current financial information for the Sellers reporting unit: Fair Carrying Amounts Values Tangible assets,net $ 84 $137 Recognized intangible assets, net…arrow_forwardIn 2022, Alliant Corporation acquired Centerpoint Incorporated for $339 million, of which $59 million was allocated to goodwill. At the end of 2024, management has provided the following information for a required goodwill impairment test: Fair value of Centerpoint Incorporated Book value of Centerpoint's net assets (excluding goodwill) Book value of Centerpoint's net assets (including goodwill) Exercise 11-31 (Algo) Part 2 & 3 $247 million 221 million 280 million 2. Determine the amount of goodwill reported in the year-end 2024 balance sheet.arrow_forward
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