On May 31, 2021, Ivanhoe Company paid $3,640,000 to acquire all of the common stock of Oriole Corporation, which became a division of Ivanhoe. Oriole reported the following balance sheet at the time of the acquisition: Current assets $ 936,000 Current liabilities $ 624,000 Noncurrent assets 2,808,000 Long-term liabilities 520,000 Stockholder's equity 2,600,000 Total assets $3,744,000 Total liabilities and stockholder's equity $3,744,000 It was determined at the date of the purchase that the fair value of the identifiable net assets of Oriole was $3,224,000. At December 31, 2021, Oriole reports the following balance sheet information: Current assets $ 832,000 Noncurrent assets (including goodwill recognized in purchase) 2,496,000 Current liabilities (728,000 ) Long-term liabilities (520,000 ) Net assets $2,080,000 It is determined that the fair value of the Oriole division is $2,288,000. 1). Compute the amount of goodwill recognized, if any, on May 31, 2021. 2) Determine the impairment loss, if any, to be recorded on December 31, 2021. 3). Assume that the fair value of the Oriole division is $2,028,000 instead of $2,288,000. Prepare the journal entry to record the impairment loss, if any, on December 31, 2021.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

ChapterA2: Investments

Section: Chapter Questions

Problem 30E

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On May 31, 2021, Ivanhoe Company paid $3,640,000 to acquire all of the common stock of Oriole Corporation, which became a division of Ivanhoe. Oriole reported the following balance sheet at the time of the acquisition:

Current assets	$ 936,000	Current liabilities	$ 624,000
Noncurrent assets	2,808,000	Long-term liabilities	520,000
		Stockholder's equity	2,600,000
Total assets	$3,744,000	Total liabilities and stockholder's equity	$3,744,000

It was determined at the date of the purchase that the fair value of the identifiable net assets of Oriole was $3,224,000. At December 31, 2021, Oriole reports the following balance sheet information:

Current assets	$ 832,000
Noncurrent assets (including goodwill recognized in purchase)	2,496,000
Current liabilities	(728,000	)
Long-term liabilities	(520,000	)
Net assets	$2,080,000

It is determined that the fair value of the Oriole division is $2,288,000.

1). Compute the amount of goodwill recognized, if any, on May 31, 2021.

2) Determine the impairment loss, if any, to be recorded on December 31, 2021.

3). Assume that the fair value of the Oriole division is $2,028,000 instead of $2,288,000. Prepare the journal entry to record the impairment loss, if any, on December 31, 2021.

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