Intermediate Accounting (2nd Edition)
2nd Edition
ISBN: 9780134730370
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 12, Problem 12.14BE
To determine
To explain: Whether the
Given information:
Fair value of cash generating unit is $2,200,000.
Carrying cost for the reported goodwill is $800,000.
The book value of net asset excluding goodwill is $1,200,000.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Wilson Corporation is performing the test of impairment of its Technology reporting unit at the end of the year. Wilson has determined the fair value of the unit using a multiple of earnings approach at $2,000,000. The carrying value of the net assets of the Technology unit is $2,100,000. What should Wilson do with this information?
a) Record an impairment loss of $100,000.
b) Record no impairment loss.
c) Perform step 2 of the test of impairment.
d) Value goodwill individually.
Corning Industries owns a patent for which it paid $77,000. At the end of the current year, accumulated amortization on the patent totaled $14,000. Due to adverse economic conditions, Corning’s management determined that it should assess whether an impairment loss should be recognized for the patent. The estimated undiscounted future cash flows to be provided by the patent total $45,000, and the patent's fair value is $30,000. (a) What is the amount of the impairment loss, if any, on the patent at the end of the current year? (b) What is the book value of the patent after any impairment loss is recorded?
General Motors.
In 2020, their Goodwill was 5230 and in 2021 it was 5087. Their goodwill is not amortized but tested for impairment annually. The testing determines whether it is more likely than not that an impairment exists. If it doesn’t exist then they do a quantitative impairment test, which carries out the amount of reporting of the amount of the unit exceeding its fair value. Goodwill on a balance sheet is the intangible assets that is created when a company acquires another company for a price more than its net asset value (Hargrave, 2022). I don’t feel they disclosed enough information for others to know about their goodwill. Their goodwill and intangible assets, net decreased from 2020 to 2021 which is the sum of the carrying amounts of the intangible assets on the balance sheet, net of the accumulated amortization and impairment charges.
Do you agree? Please explain.
Chapter 12 Solutions
Intermediate Accounting (2nd Edition)
Ch. 12 - Prob. 12.1QCh. 12 - Can firms group all property, plant, and equipment...Ch. 12 - Prob. 12.3QCh. 12 - Prob. 12.4QCh. 12 - Do firms follow the same steps for impairment...Ch. 12 - Prob. 12.6QCh. 12 - Prob. 12.7QCh. 12 - Prob. 12.8QCh. 12 - Under IFRS, if a firm recovers an impairment loss...Ch. 12 - Under IFRS, when do firms test plant assets and...
Ch. 12 - Prob. 12.11QCh. 12 - Prob. 12.12QCh. 12 - Prob. 12.1MCCh. 12 - Prob. 12.2MCCh. 12 - Prob. 12.3MCCh. 12 - Prob. 12.4MCCh. 12 - Prob. 12.5MCCh. 12 - Prob. 12.6MCCh. 12 - Prob. 12.1BECh. 12 - Prob. 12.2BECh. 12 - Prob. 12.3BECh. 12 - Prob. 12.4BECh. 12 - Indefinite-Life Intangible Asset Impairment....Ch. 12 - Prob. 12.6BECh. 12 - Prob. 12.7BECh. 12 - Prob. 12.8BECh. 12 - Prob. 12.9BECh. 12 - Prob. 12.10BECh. 12 - Impairment Reversal. IFRS. Perlu Products an IFRS...Ch. 12 - Prob. 12.12BECh. 12 - Prob. 12.13BECh. 12 - Prob. 12.14BECh. 12 - Prob. 12.15BECh. 12 - Prob. 12.16BECh. 12 - Prob. 12.17BECh. 12 - Prob. 12.18BECh. 12 - Prob. 12.19BECh. 12 - Prob. 12.20BECh. 12 - Prob. 12.21BECh. 12 - Prob. 12.22BECh. 12 - Prob. 12.23BECh. 12 - Tangible Asset Impairment. Henne Optical...Ch. 12 - Tangible Asset Impairment Loss. Use the same...Ch. 12 - Prob. 12.3ECh. 12 - Prob. 12.4ECh. 12 - Prob. 12.5ECh. 12 - Tangible Asset Impairment Loss, IFRS. Use the same...Ch. 12 - Prob. 12.7ECh. 12 - Prob. 12.8ECh. 12 - Prob. 12.9ECh. 12 - Assets Held for Disposal. Hattie Corporation...Ch. 12 - Prob. 12.11ECh. 12 - Asset Revaluation, Downwards, IFRS. Lousa Company...Ch. 12 - Tangible Asset Impairment. Chrispian Cookies, Inc....Ch. 12 - Prob. 12.2PCh. 12 - Tangible Asset Impairment. Using the same...Ch. 12 - Prob. 12.4PCh. 12 - Goodwill Impairment, Tangible Fixed Assets, and...Ch. 12 - Tangible Asset Impairment, Potential Reversal,...Ch. 12 - Prob. 12.7PCh. 12 - Prob. 12.8PCh. 12 - Prob. 12.9PCh. 12 - Comprehensive Asset Revaluation Problem (Initial...Ch. 12 - Prob. 12.11PCh. 12 - Judgment Case 1: Impairments of PPE under IFRS...Ch. 12 - Prob. 2JCCh. 12 - Prob. 3JCCh. 12 - Financial Statement Analysis Case 1: Long-Lived...Ch. 12 - Surfing the Standards Case 1: Impairments of PPE...Ch. 12 - Prob. 2SSCCh. 12 - Prob. 1BCCCh. 12 - Basis for Conclusions Case 2: Intangible Assets ...Ch. 12 - Basis for Conclusions Case 3: Goodwill Impairment...
Knowledge Booster
Similar questions
- Farm Fresh Agriculture Company purchased Sunny Side Egg Distribution for $400,000 cash when Sunny Side had net assets worth $390,000. A. What is the amount of goodwill in this transaction? B. What is Farm Fresh Agriculture Companys journal entry to record the purchase of Sunny Side Egg Distribution? C. What journal entry should Farm Fresh Agriculture Company write when the company tests for impairment and determines that goodwill is worth $1,000 in the year following the purchase of Sunny Side?arrow_forwardBuchanan Imports purchased McLaren Corporation for $5,000,000 cash when McLaren had net assets worth $4,500,000. A. What is the amount of goodwill in this transaction? B. What is Buchanans journal entry to record the purchase of McLaren? C. What journal entry should Buchanan write when the company internally generates additional goodwill in the year following the purchase of McLaren?arrow_forwardOn May 1, 2015, Zoe Inc. purchased Branta Corp. for $15,000,000 in cash. They only received $12,000,000 in net assets. In 2016, the market value of the goodwill obtained from Branta Corp. was valued at $4,000,000, but in 2017 it dropped to $2,000,000. Prepare the journal entry for the creation of goodwill and the entry to record any impairments to it in subsequent years.arrow_forward
- Comprehensive: Acquisition, Subsequent Expenditures, and Depreciation On January 2, 2019, Lapar Corporation purchased a machine for 50,000. Lapar paid shipping expenses of 500, as well as installation costs of 1,200. The company estimated that the machine would have a useful life of 10 years and a residual value of 3,000. On January 1, 2020, Lapar made additions costing 3,600 to the machine in order to comply with pollution-control ordinances. These additions neither prolonged the life of the machine nor increased the residual value. Required: 1. If Lapar records depreciation expense under the straight-line method, how much is the depreciation expense for 2020? 2. Assume Lapar determines the machine has three significant components as shown below. If Lapar uses IFRS, what is the amount of depreciation expense that would be recorded?arrow_forwardExpenditures After Acquisition Listed below are several transactions: a. Paid $80 cash to replace a minor part of an air conditioning system. b. Paid $40,000 to fix structural damage to a building. c. Paid $8,000 for monthly salaries. d. Paid $12,000 to replace a manual cutting machine with a computer-controlled machine. e. Paid $1,000 related to the annual painting of a building. Required: Classify each transaction as either a revenue expenditure, a capital expenditure, or neither.arrow_forwardColquhoun International purchases a warehouse for $300,000. The best estimate of the salvage value at the time of purchase was $15,000, and it is expected to be used for twenty-five years. Colquhoun uses the straight-line depreciation method for all warehouse buildings. After four years of recording depreciation, Colquhoun determines that the warehouse will be useful for only another fifteen years. Calculate annual depreciation expense for the first four years. Determine the depreciation expense for the final fifteen years of the assets life, and create the journal entry for year five.arrow_forward
- On December 31, 2021, after a slight mishap, Wreckless Transport Co. decides to evaluate its delivery truck for possible impairment. The company has the following information as of 12-31-2021: Equipment cost 65,000 Accumulated depreciation to date 20,000 Expected future net cash flows 10,000 Fair Value on 12-31-2021 8,000 Disposal costs 2,000 Fair value of equipment on 12-31-2022 15,000 Assume that the company will continue to use this asset in the future. As of December 31, 2021, the equipment has a remaining useful life of 4 years. INSTRUCTIONS: A Prepare the journal entry, if any, to record impairment at 12-31-2021 B Prepare the journal entry, if any, at December 31, 2022 to record the increase in fair value. C Prepare the journal entry on 12-31-2021 to record impairment assuming that the company intends to dispose of the truck rather than continue to use it. Show work to explain please.arrow_forwardJurassic Company owns equipment that cost $900,000 and has accumulated depreciation of $380,000. The expected future net cash flows from the use of the asset are expected to be $500,000. The fair value of the equipment is $400,000. Prepare the journal entry, if any, to record the impairment loss.arrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
- Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax CollegeIntermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
- Financial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage Learning
Principles of Accounting Volume 1
Accounting
ISBN:9781947172685
Author:OpenStax
Publisher:OpenStax College
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning
Financial Accounting: The Impact on Decision Make...
Accounting
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Cengage Learning