Answered

Join IDNLearn.com today and start getting the answers you've been searching for. Ask your questions and receive comprehensive, trustworthy responses from our dedicated team of experts.

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 $215,500 $261,000 $158,250
Trademark 257,000
Customer list 154,500
Unpatented technology 232,500
Licenses 100,000
Copyrights 65,500
Goodwill 190,250 187,550 136,500
Liabilities (35,000)

The total fair values for each reporting unit (including goodwill) are $773,950 for RU-1, $736,450 for RU-2, and $743,500 for RU-3. To date, Purchase has reported no goodwill impairments.

Required:
How much goodwill impairment should Purchase report this year for each of its reporting units?


Sagot :

Anthougoidn

Answer:

Purchase Company

                                                                  RU-1           RU-2          RU-3

Goodwill Impairment loss (gain)           $8,300      $44,600 ($383,250)

Explanation:

a) Data and Calculations:

Carrying Amounts

                                   RU-1           RU-2          RU-3

Tangible assets   $215,500   $261,000   $158,250

Trademark            257,000

Customer list        154,500

Unpatented technology        232,500

Licenses                                 100,000

Copyrights                                                  65,500

Goodwill               190,250       187,550     136,500

Liabilities              (35,000)

Book values      $782,250    $781,050  $360,250

Fair values        $773,950    $736,450  $743,500

Goodwill Impairment

 loss (gain)           $8,300      $44,600 ($383,250)

b) Purchase Company will recognize Goodwill impairment expense for RU-1 and RU-2.  It will recognize a Goodwill impairment gain for RU-3.  A goodwill impairment gain results when the fair value is higher than the book value of the net realizable assets.

We greatly appreciate every question and answer you provide. Keep engaging and finding the best solutions. This community is the perfect place to learn and grow together. Trust IDNLearn.com for all your queries. We appreciate your visit and hope to assist you again soon.