Conchita reports the following balance sheet information. Current assets $480,000 Noncurrent assets (including goodwill recognized in purchase) 2,330,000 Current liabilities (660,000 ) Long-term liabilities (460,000 ) Net assets $1,690,000 Finally, it is determined that the fair value of the Conchita Division is $1,850,000. 1). Compute the amount of goodwill recognized, if any, on July 31, 2020. 2). Determine the impairment loss, if any, to be recorded on December 31, 2020. 3). Assume that fair value of the Conchita Division is $1,642,000 instead of $1,850,000. Determine the impairment loss, if any, to be recorded on December 31, 2020
On July 31, 2020, Ivanhoe Company paid $3,000,000 to acquire all of the common stock of Conchita Incorporated, which became a division (a reporting unit) of Ivanhoe. Conchita reported the following balance sheet at the time of the acquisition.
|
Current assets
|
$750,000
|
Current liabilities
|
$500,000
|
|||
|---|---|---|---|---|---|---|
|
Noncurrent assets
|
2,700,000
|
Long-term liabilities
|
400,000
|
|||
|
Total assets
|
$3,450,000
|
|
2,550,000
|
|||
|
Total liabilities and stockholders’ equity
|
$3,450,000
|
It was determined at the date of the purchase that the fair value of the identifiable net assets of Conchita was $2,755,000. Over the next 6 months of operations, the newly purchased division experienced operating losses. In addition, it now appears that it will generate substantial losses for the foreseeable future. At December 31, 2020, Conchita reports the following balance sheet information.
| Current assets |
$480,000
|
||
| Noncurrent assets (including |
2,330,000
|
||
| Current liabilities |
(660,000
|
)
|
|
| Long-term liabilities |
(460,000
|
)
|
|
| Net assets |
$1,690,000
|
|
Finally, it is determined that the fair value of the Conchita Division is $1,850,000.
1). Compute the amount of goodwill recognized, if any, on July 31, 2020.
2). Determine the impairment loss, if any, to be recorded on December 31, 2020.
3). Assume that fair value of the Conchita Division is $1,642,000 instead of $1,850,000. Determine the impairment loss, if any, to be recorded on December 31, 2020
4). Prepare the
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