rr Sheffield Corporation has three divisions. One division, Pritt Products, was purchased four years ago for $2 million and has beenidentified as a reporting unit. Unfortunately, it has experienced operating losses over the past three quarters and management isreviewing the reporting unit to determine whether there has been an impairment of goodwill. The carrying amounts of Pritt's netassets, including the associated goodwill of $877,000, are listed below. Assume that Pritt's reporting unit is also a cash-generating unitunder IFRS.Pritt Reporting Unit-Carrying Amount of Net Assets Including GoodwillCash$190,000326,000707,000870,0004ReceivablesInventoryProperty, plant, and equipment (net)GoodwillLess: Accounts and notes payableNet assets, at carrying amounts877,000(491,000)$2,479,000Assume that the fair value of the Pritt reporting unit as a whole is estimated to be $2,098,000. Also assume that managementdetermines that the unit's value in use is $2,208,000 and that the company would incur direct costs of $53,000 if the unit were sold. Calculate goodwill impairment under ASPE and under IFRS.Goodwill-loss on impairmentASPE$IFRS271000

ASPE requires goodwill to be tested for impairment whenever events or changes in circumstances…

Answered: Calculate goodwill impairment under…

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter6: Accounting Quality

Section: Chapter Questions

Problem 9QE

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Oriole Corporation purchased Pharoah Company 3 years ago and at that time recorded goodwill of $777,600. The Division's net identifiable assets, including the goodwill, have a carrying amount of $1,296,000. The fair value of the division is estimated to be $1,188,000. Prepare Oriole's journal entry, if necessary, to record the impairment of the goodwill. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry for the account titles and enter 0 for the amounts. List debit entry before credit entry.) Account Titles and Explanation Debit Credit
Waters Corporation purchased Johnson Company 3 years ago and at that time recorded goodwill of $400,000. The Johnson Division's net assets, including the goodwill, have a carrying amount of $800,000. The recoverable amount of the division is estimated to be $1,000,000. Prepare Waters' journal entry, if necessary, to record impairment of the goodwill.
Konopelski Corporation purchased McKenzie Company 3 years ago and at that time recorded goodwill of $755,000. The Division's net assets, including the goodwill, have a carrying amount of $1,754,000. The fair value of the division is estimated to be $1,001,000. PART A Account No Journal Entry Required PART B What is the carrying amount of goodwill after your assessment in Part A? $ Debit Credit
Waters Corporation purchased Johnson Company 3 years ago and at that time recorded goodwill of $400,000. The Johnson Division’s net assets, including the goodwill, have a carrying amount of $800,000. The fair value of the division is estimated to be $1,000,000. Assume that the fair value of the division is estimated to be $750,000 and the implied goodwill is $350,000. Prepare Waters’ journal entry, if necessary, to record impairment of the goodwill.
Leon Corp. purchased Spinks Co. 4 years ago and at that time recorded goodwill of €300,000. The Sinks Division's net assets, including goodwill, have a carrying amount of €720,000. The recoverable amount of the division is estimated to be €650,000. Prepare an entry to record the impairment of the goodwill. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)
Gandaph Corporation purchased a division five years ago for $ 3 million. The division has been identified as a reporting unit that is cash-generating under IFRS. Management is reviewing the division for impairment of goodwill and has estimated the fair value of the reporting unit to be $ 3.28 million and the unit’s value in use to be $ 3.45 million. In addition, there would be $ 85,000 in direct costs should the company decide to sell. The carrying amounts of the division’s net assets, including the associated goodwill of $ 1,450,000, are listed below. Carrying Amount of Net Assets Including Goodwill Cash $ 300,000 Receivables 450,000 Inventory 1,050,000 Property, plant, and equipment (net) 1,200,000 Goodwill 1,450,000 Less: Accounts and notes payable (750,000) Net assets, at carrying amounts $ 3,700,000 Required: Determine if goodwill is impaired and provide the related journal entries, if any, under both ASPE and IFRS.
Sheffield Corporation purchased Sage Hill Company 3 years ago and at that time recorded goodwill of $460,000. The Sage Hill Division’s net assets, including the goodwill, have a carrying amount of $840,000. The fair value of the division is estimated to be $792,000.Prepare Sheffields' journal entry, if necessary, to record impairment of the goodwill.
Waters Corporation purchased Johnson Company 3 years ago and at that time recorded goodwill of $400,000. The Johnson Division's net assets, including the goodwill, have a carrying amount of $800,000. The fair value of the division is estimated to be $1,000,000. Prepare Waters' journal entry, if necessary, to record impairment of the goodwill.
The company controller, Barry Melrose, has asked for your help in interpreting the authoritative accounting literature that addresses the recognition and measurement of impairment losses for property, plant, and equipment andintangible assets. “We have a significant amount of goodwill on our books from last year’s acquisition of Churchill Corporation. Also, I think we may have a problem with the assets of some of our factories out West. And oneof our divisions is currently considering disposing of a large group of depreciable assets.”Your task as assistant controller is to research the issue.Required:1. Obtain the relevant authoritative literature on accounting for the impairment of property, plant, and equipment and intangible assets using the FASB Accounting Standards Codification. You might gain access at theFASB website (www.fasb.org). Cite the reference locations regarding impairment of property, plant, andequipment and intangible assets.2. When should property, plant, and…
During the current year, Omega Products Corporation incurred the following expenditures whichshould be recorded either as operating expenses or as intangible assets:a. Expenditures were made for the training of new employees. The average employee remainswith the company for five years, but is trained for a new position every two years.b. Omega purchased a controlling interest in a wallpaper company. The expenditure resulted inrecording a significant amount of goodwill. Omega expects to earn above-average returns onthis investment indefinitely.c. Omega incurred large amounts of research and development costs in developing a superiorproduct. The company expects that it will be patented and that sales of the resulting productswill contribute to revenue for at least 40 years. The legal life of the patent, however, will be only20 years.d. Omega made an expenditure to acquire the patent on a whatsa. The patent had a remaining legallife of 10 years, but Omega expects to produce and sell the…
Orioles Construction & Paving expanded its business by purchasing Alcott Maintenance, a division that provides road maintenance services. The division was purchased three years ago for $3,130,000 and has been identified as a reporting unit. The net assets for the division including goodwill are as follows: Cash $229,000 Accounts Receivables 295,000 Inventory 767,000 Property, Plant & Equipment 898,000 Goodwill 1,307,000 Accounts Payable (137,000 ) Unearned Revenue (70,000 ) Net assets, at carrying amounts $3,289,000 The fair value of the Alcott Maintenance Division reporting unit as a whole is estimated to be $3,008,000. Management determines that the unit’s value in use is $3,117,000. Prepare any appropriate journal entries for goodwill impairment assuming that Oriole Construction & Paving is reporting under ASPE. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.…
Orioles Construction & Paving expanded its business by purchasing Alcott Maintenance, a division that provides road maintenance services. The division was purchased three years ago for $3,130,000 and has been identified as a reporting unit. The net assets for the division including goodwill are as follows: Cash $229,000 Accounts Receivables 295,000 Inventory 767,000 Property, Plant & Equipment 898,000 Goodwill 1,307,000 Accounts Payable (137,000 ) Unearned Revenue (70,000 ) Net assets, at carrying amounts $3,289,000 The fair value of the Alcott Maintenance Division reporting unit as a whole is estimated to be $3,008,000. Management determines that the unit’s value in use is $3,117,000. Prepare any appropriate journal entries for goodwill impairment assuming that Oriole Construction & Paving is reporting under ASPE. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.…

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