am.107. Goodwill Impairment TestAssume the equity method Equity Investment account relating to a subsidiary has a reported balance of $8,785,000, including $840,000 of Goodwill. The fair value of the subsidiary is $7,875,000. The fair value of thesubsidiary's individually identifiable net assets is $7,525,000. The subsidiary has only one reporting unit, which is the same as the overall entity.For this fact set, determine whether Goodwill is impaired and, if so, the amount of impairment.Enter the impairment amount below. If goodwill is not impaired, enter zero.$490,000xPrepare the required journal entry if you determine Goodwill is impaired.If goodwill is not impaired, select "No entry" as your answers under Description and leave the Debit and Credit answers blank (zero).DescriptionEquity income from subsidiaryEquity investmentDebitCredit÷910,000 x00910,000 x

The objective of the question is to determine whether Goodwill is impaired and if so, the amount of…

Answered: Goodwill Impairment Test Assume the…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Statement 1: Current fair value of the investment adjusted for dividends received describes the amount at which a parent company reports its investment in a Subsidiary under the cost method for periods subsequent to the business combination. Statement 2: Under the cost method of accounting for investment, depreciation and amortization of the allocated difference between the fair values and book values of acquired subsidiary’s identifiable net assets is debited to the Subsidiary’s expense accounts, in the working paper. a. Only Statement 2 is correct b. Both statements are incorrect c. Only Statement 1 is correct d. Both statements are correct
Measurement of Goodwill A parent has purchased a 100% interest in a subsidiary for $30,000. On the acquisition date, the subsidiary’s reported net assets have a pre-acquisition book value of $21,000 and the subsidiary’s identifiable net assets have a fair value of $24,000. Required a. How much Goodwill, if any, will the parent record in this acquisition? $Answer b. Now, assume the subsidiary’s reported net assets have a pre-acquisition book value of $25,500 and the subsidiary’s identifiable net assets have a fair value of $33,000. How do you account for this new value? The equity investment balance will be reported in the amount of $Answer.The parent will recognize $Answe as a gain or loss
Calculate the goodwill on consolidation from the information below: Parent’s cost of investment in subsidiary 299,700 Net asset at acquisition date (parent) 986,600 Net asset at acquisition date (subsidiary) 345,800 Fair value of non-controlling interest at acquisition date 169,500 Net asset at reporting date (subsidiary) 316,400 Parent has 80% interest in subsidiary Impairment of goodwill 62,200
S1: Current fair value of the investment adjusted for dividends received describes the amount at which a parent company reports its investment in a Subsidiary under the cost method for periods subsequent to the business combination. S2: Under the cost method of accounting for investment, depreciation and amortization of the allocated difference between the fair values and book values of acquired subsidiary’s identifiable net assets is debited to the Subsidiary’s expense accounts, in the working paper. Only S1 is correct Both statements are correct Both statements are incorrect Only S2 is correct
Assigning bargain purchase gain (i.e., "negative goodwill") to controlling and noncontrolling interests Assume that on July 1, 2013, a parent company paid $1,740,000 to purchase a 75% interest in a subsidiary's voting common stock. On that date, the fair value of the 25% interest not purchased by the parent company is $575,000. The acquisition-date fair value of the identifiable net assets of the subsidiary is $2,400,000. What is the amount of goodwill assigned to the controlling and noncontrolling interests, respectively, on the acquisition date? $60,000 bargain purchase gain assigned to the controlling interest and $10,000 bargain purchase gain assigned to the noncontrolling interest $60,000 goodwill assigned to the controlling interest and $10,000 goodwill assigned to the noncontrolling interest $35,000 bargain purchase gain assigned to the controlling interest and $35,000 bargain purchase gain assigned to the noncontrolling interest $85,000 bargain purchase gain assigned…
Computing the noncontrolling interests equity balance Assume the following facts relating to an 90% owned subsidiary company: BOY stockholders’ equity $1,300,000 BOY AAP assets 169,000 Net income of subsidiary (not including [A] asset depreciation and amortization) 312,000 AAP assets depreciation and amortization expense 52,000 Dividends declared and paid by subsidiary 26,000 a. Compute the net income attributable to noncontrolling interests for the year. b. Compute the amount reported as noncontrolling equity at the end of the year.
Assigning goodwill to controlling and noncontrolling interests Assume that on July 1, 2013, a parent company paid $1,881,000 to purchase a 75% interest in a subsidiary’s voting common stock. On that date, the fair value of the 25% interest not purchased by the parent company is $625,000. The acquisition-date fair value of the identifiable net assets of the subsidiary is $2,400,000. What is the amount of goodwill assigned to the controlling and noncontrolling interests, respectively, on the acquisition date? $76,000 and $25,000 $79,500 and $26,500 $80,000 and $26,000 $81,000 and $25,000
Consolidated net income for a parent company and its partially owned subsidiary is best defined as the parent company’sA. Recorded net income plus the subsidiary’s recorded net income after adjustment from any amortization of excess amount from book value compared to fair value.B. Recorded net incomeC. Income from independent operations plus subsidiary’s income resulting from transactions with outside parties after adjustment from any amortization of excess amount from book value compared to fair value.D. Recorded net income plus the subsidiary’s recorded net income
S1: Under the acquisition method, if the fair values of identifiable net assets exceed the value implied by the purchase price of the acquired company, the excess should be accounted for goodwill. S2: With an acquisition, direct and indirect expenses are considered a par of the total cost of the acquired company. Both statements are Only S1 is Only S2 is Both statements are 2. Following the completion of a business combination in the form of a statutory consolidation, what is the balance in the new corporation’s Retained earningsaccount? The acquirer retained earnings accountbalance Thesum of the acquirer and acquiree retained earnings account The acquiree retained earnings accountbalance Zero 3. S1: The acquisition-related costs in a business combination to be expensed immediately include cost of issuing debt securities. S2: In a business combination any “gain on bargain purchase” shall be recognized in other comprehensive income. Only S2 is Both statements are Both statements…
Statement 1: In a business combination resulting a parent company-wholly owned subsidiary relationship, goodwill developed in the working paper elimination is attributed in its entirety to the parent. Statement 2: On the date of business combination of a parent company and its partially owned subsidiary, under the computation method used in full goodwill method, the amount assigned to minority interest in nest assets of subsidiary is based on the cost of the parent company’s investment in the subsidiary’s common stock. Statement 3: Consolidated net income is equal to the parent’s income from its net income under its Income Statement, plus the net income from each of the consolidated subsidiaries, adjusted for any differential write-off. Statement 4: It is useful to formulate eliminating entries in general form, because they are recorded in the general journal of the parent, to be sure that they balance before entering them in the working paper. Which statements above are correct?
Pushdown Accounting Assume a parent company acquires its subsidiary by paying $1,700,000 for all of the outstanding voting shares of the investee. On the acquisition date, subsidiary's assets and liabilities have individual fair values that equal their book values, except for property equipment with a fair value greater than book value by $150,000 and license with a fair value greater than book value by $250,000. The parent and subsidiary have the following balance sheets immediately after the acquisition, but before any pushdown adjustments by the subsidiary: Parent Parent Subsidiary Assets: Cash & receivables $ 800,000 $ 350,000 Inventory 600,000 200,000 Property & equipment, net 2,300,000 1,025,000 Equity investment 1,700,000 Licenses - 275,000 $ 5,400,000 $ 1,850,000 Liabilities and stockholders' equity: Current liabilities $ 400,000 $ 400,000 Other liabilities 300,000 - Note payable - 600,000 Common stock 1,670,000…
1. At the date of an acquisition which resulted to either goodwill or gain on bargain purchase, the acquisition method: A. Consolidates the subsidiary's assets and liabilities at book value. B. Consolidates the subisdiary's assets at fair value and libailities at book value. C. Consolidates the subsidiary's assets at book value and liabilities at fair value. D. Consolidates the subsidiary's assets and liabilities at fair value. 2. The consideration transferred in a business combination will most likely include which of the following? A. The transaction price in an arrangement that is primarily for the benefit of the acquirer or the combined entity. B. A contingent liability with an acquisition-date fair value but imposes an improbable outflow that the acquirer assumes in a business combination. C. The "off-market" value of a reacquired right. D. The acquisition-date fair value of a contingent consideration that is dependent upon the occurrence of a possible, but not probable,…

SEE MORE QUESTIONS

Recommended textbooks for you

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

Horngren's Cost Accounting: A Managerial Emphasis…

Accounting

ISBN:

9780134475585

Author:

Srikant M. Datar, Madhav V. Rajan

Publisher:

PEARSON

Intermediate Accounting

Accounting

ISBN:

9781259722660

Author:

J. David Spiceland, Mark W. Nelson, Wayne M Thomas

Publisher:

McGraw-Hill Education

Financial and Managerial Accounting

Accounting

ISBN:

9781259726705

Author:

John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS