On May 31, 2011, Armstrong Company paid P3,500,000 to acquire all of the common stock of Hall Corporation, which became a division of Armstrong. Hall reported the following balance sheet at the time of the acquisition: Current assets P900,000 Current liabilities P600,000 Noncurrent assets 2,700,000 Long-term liabilities 500,000 Stockholders’ equity 2,500,000 Total liabilities and Total assets P3,600,000 stockholders’ equity P3,600,000 It was determined at the date of the purchase that the fair value of the identifiable net assets of Hall was P2,800,000. At December 31, 2011, Hall reports the following balance sheet information: Current assets P800,000 Noncurrent assets (including goodwill recognized in purchase) 2,400,000 Current liabilities (700,000) Long-term liabilities (500,000) Net assets P2,000,000 It is determined that the fair market value of the Hall division is P2,100,000. The recorded amount for Hall’s net assets (excluding goodwill) is the same as fair value, except for property, plant, and equipment, which has a fair value of P200,000 above the carrying value. Required: 1. The amount of goodwill recognized, if any, on May 31, 2011. ___________ 2. The impairment loss, if any, to be recorded on December 31, 2011. ___________ 3. Assume that the fair value of the Hall division is P1,900,000 instead of P2,100,000. Prepare the journal entry to record the impairment loss, if any, on December 31, 2011. Implied fair value of goodwill = Fair value of division less the carrying value of the division (adjusted for fair value changes), net of goodwill: Fair value of Hall division P1,900,000 Carrying value of division P2,000,000 Increase in fair value of PP&E 200,000 Less goodwill (700,000) (1,500,000) Implied value of goodwill 400,000 Carrying amount of goodwill (500,000) Loss on impairment ___________ Loss on Impairment ___________ Goodwill ___________
On May 31, 2011, Armstrong Company paid P3,500,000 to acquire all of the common stock of Hall Corporation, which became a division of Armstrong. Hall reported the following balance sheet at the time of the acquisition:
Current assets P900,000 Current liabilities P600,000
Noncurrent assets 2,700,000 Long-term liabilities 500,000
Total liabilities and
Total assets P3,600,000 stockholders’ equity P3,600,000
It was determined at the date of the purchase that the fair value of the identifiable net assets of Hall was P2,800,000. At December 31, 2011, Hall reports the following balance sheet information:
Current assets P800,000
Noncurrent assets (including
recognized in purchase) 2,400,000
Current liabilities (700,000)
Long-term liabilities (500,000)
Net assets P2,000,000
It is determined that the fair market value of the Hall division is P2,100,000. The recorded amount for Hall’s net assets (excluding goodwill) is the same as fair value, except for property, plant, and equipment, which has a fair value of P200,000 above the carrying value.
Required:
1. The amount of goodwill recognized, if any, on May 31, 2011. ___________
2. The impairment loss, if any, to be recorded on December 31, 2011. ___________
3. Assume that the fair value of the Hall division is P1,900,000 instead of P2,100,000. Prepare the
Implied fair value of goodwill = Fair value of division less the carrying value of the division (adjusted for fair value changes), net of goodwill:
Fair value of Hall division P1,900,000
Carrying value of division P2,000,000
Increase in fair value of PP&E 200,000
Less goodwill (700,000)
(1,500,000)
Implied value of goodwill 400,000
Carrying amount of goodwill (500,000)
Loss on impairment ___________
Loss on Impairment ___________
Goodwill ___________
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