Advanced Financial Accounting 12th Edition by Theodore Christensen solution manual

 
b. The carrying value of the reporting unit ($550,000) exceeds the fair value of the reporting unit ($540,000). Thus, an impairment of goodwill of $10,000 ($550,000 - $540,000) must be recognized. Goodwill of $140,000 will be reported.
 
c. The carrying value of the reporting unit ($550,000) exceeds the fair value of the reporting unit ($500,000).  Thus, an impairment loss of $50,000 ($550,000 - $500,000) must be recognized. Goodwill of $100,000 will be reported.
 
d. The carrying value of the reporting unit ($550,000) exceeds the fair value of the reporting unit ($460,000). Thus, an impairment loss of $90,000 ($550,000 - $460,000) must be recognized.  Goodwill of $60,000 will be reported.
 
 
E1-19  Computation of Fair Value
 
 
Amount paid
 
$517,000 

 
Book value of assets
$624,000 
 

 
Book value of liabilities
(356,000)
 

 
Book value of net assets
$268,000 
 

 
Adjustment for research and development costs
  (40,000)
 

 
Adjusted book value
$228,000 
 

 
Fair value of patent rights
120,000 
 

 
Goodwill recorded
    93,000 
(441,000)

 
Fair value increment of buildings and equipment
 
$  76,000 

 
Book value of buildings and equipment
 
  341,000 

 
Fair value of buildings and equipment
 
$417,000 

 
 
 

E1-20  Computation of Shares Issued and Goodwill
 
a.
15,600 shares were issued, computed as follows:

 
 
 
 

 
Par value of shares outstanding following merger
 
$327,600 

 
Paid-in capital following merger
 
  650,800 

 
Total par value and paid-in capital
 
$978,400 

 
Par value of shares outstanding before merger
$218,400
 

 
Paid-in capital before merger
  370,000
 

 
 
 
(588,400)

 
Increase in par value and paid-in capital
 
$390,000 

 
Divide by price per share
 
÷      $25 

 
Number of shares issued
 
   15,600 

 
 
 
 

b.
The par value is $7, computed as follows:
 
 

 
 
 
 

 
Increase in par value of shares outstanding
($327,600 - $218,400)
 
 

 
Divide by number of shares issued
 
$109,200 

 
Par value
 
÷  15,600 

 
 
 
$      7.00 

 
 
 
 

c.
Goodwill of $34,000 was recorded, computed as follows:

 
 
 
 

 
Increase in par value and paid-in capital
 
$390,000 

 
Fair value of net assets ($476,000 - $120,000)
 
(356,000)

 
Goodwill
 
$  34,000 

                                                     
E1-21  Combined Balance Sheet
 
Pam Corporation and Slest Company
Combined Balance Sheet
January 1, 20X2

 
 
 
 

Cash and Receivables
$  240,000 
Accounts Payable
$  125,000

Inventory
460,000 
Notes Payable
235,000

Buildings and Equipment
840,000 
Common Stock
244,000

Less: Accumulated Depreciation
(250,000)
Additional Paid-In Capital
556,000

Goodwill
       75,000 
Retained Earnings
     205,000

 
$1,365,000 
 
$1,365,000

Computation of goodwill