Calculate the amount of goodwill recognized, if any, on July 31, 2020, Goodwill
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter13: Investments And Long-term Receivables
Section: Chapter Questions
Problem 8MC
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Transcribed Image Text:On July 31, 2020, Swifty Company paid $3,540,000 to acquire all of the common shares of Blue Spruce Incorporated, which became a
division of Swifty. Blue Spruce reported the following statement of financial position at the time of the acquisition
Blue Spruce Inc.
Statement of Financial Position
As at July 31, 2020
Current assets
$944,000 Current liabilities
$708.000
Non-current assets
3.186.000 Long-term liabilities
590.000
Shareholders'equity
2832.000
Total liabilities and
Total assets
$4.130.000
shareholders equity $4.130.000
Itwas determined at the date of the purchase that the fair value of the identifiable net assets of Blue Spruce was $3.245,000. Over the
next six months of operations, the newly purchased division experienced operating losses. In addition, it now appears that it will
generate substantial losses for the foresecable future. At December 31, 2020, Blue Spruce reports the following statement of
financial position information:
Current assets
531.000
Non-current assets (including goodwill recognized in purchase)
2,832.000
Current liabilities
(826.000 )
Long-term liabilities
(590,000 )
Net assets
$1.947,000
It is determined that the fair value of the Blue Spruce Division as at December 31, 2020, is $2,183.000 The recorded amount for Blue
Spruce's net assets (excluding goodwill) is the same as fair value, except for property, plant, and equipment, which has a fair value
$177,000 above the carrying value. Assume that Swifty follows ASPE for financial reporting purposes.
Calculate the amount of goodwill recognized, if any, on July 31, 2020.
Goodwill
$.
Determine the loss on impairment. if any, to be recorded on December 31.2020.(f an answer s zero, please enter 0. Do not leave any
fields blank.)
Impairment loss
Assume that fair value of the Blue Spruce Division is $1.888,000 instead of $2.183,000 Determine the loss on impairment, if any
to be recorded on December 31.2020.
Impairment loss
Prepare the journal entry to record the loss on impairment, if any. (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 O for the amounts)
Account Titles and Explanation
Debit
Credit
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