Advanced Financial Accounting 12th Edition by Theodore Christensen solution manual
Journal entry to record acquisition of Sorden Company net assets:
Cash and Receivables
50,000
Inventory
200,000
Land
100,000
Plant and Equipment
300,000
Discount on Bonds Payable
17,000
Goodwill
8,000
Accounts Payable
50,000
Bonds Payable
625,000
Computation of goodwill
Fair value of consideration given
$608,000
Fair value of assets acquired
$650,000
Fair value of liabilities assumed
(50,000)
Fair value of net assets acquired
600,000
Goodwill
$ 8,000
E1-14 Bargain Purchase
Journal entry to record acquisition of Sorden Company net assets:
Cash and Receivables
50,000
Inventory
200,000
Land
100,000
Plant and Equipment
300,000
Discount on Bonds Payable
16,000
Accounts Payable
50,000
Bonds Payable
580,000
Gain on Bargain Purchase of Subsidiary
36,000
Computation of Bargain Purchase Gain
Fair value of consideration given
$564,000
Fair value of assets acquired
$650,000
Fair value of liabilities assumed
(50,000)
Fair value of net assets acquired
600,000
Bargain Purchase Gain
$ 36,000
E1-15 Goodwill Impairment
a. Goodwill of $80,000 will be reported. The fair value of the reporting unit ($340,000) is greater than the carrying amount of the reporting unit ($290,000). As a result, no impairment loss will be recorded.
b. An impairment loss of $10,000 ($290,000 - $280,000) will be recognized. Therefore, goodwill of $70,000 will be reported (80,000 – 10,000 impairment loss).
c. An impairment loss of $30,000 ($290,000 - $260,000) will be recognized. Therefore, goodwill of $50,000 will be reported (80,000 – 30,000 impairment loss).
E1-16 Goodwill Impairment
a. No impairment loss will be recognized. The estimated fair value of the reporting unit ($530,000) is greater than the carrying value of the reporting unit’s net assets ($500,000).
b. A goodwill impairment of $15,000 will be recognized ($500,000 - $485,000).
c. A goodwill impairment of $50,000 will be recognized ($500,000 - $450,000).
E1-17 Goodwill Assigned to Reporting Units
Goodwill of $146,000 ($50,000 + $48,000 + $8,000 + $40,000) should be reported, computed as follows:
Reporting Unit A: A goodwill impairment of $10,000 should be recognized ($700,000 - $690,000). Thus, goodwill of $50,000 ($60,000 - $10,000 impairment) should be reported on December 31, 20X7..
Reporting Unit B: There is no goodwill impairment because the fair value of the reporting unit exceeds the carrying value. Goodwill of $48,000 should be reported on December 31, 20X7.
Reporting Unit C: A goodwill impairment of $20,000 should be recognized ($380,000 - $370,000). Thus, goodwill of $8,000 ($28,000 - $20,000 impairment) should be reported on December 31, 20X7.
Reporting Unit D: There is no goodwill impairment because the fair value of the reporting unit exceeds the carrying value. Goodwill of $40,000 should be reported.
E1-18 Goodwill Measurement
a. The fair value of the reporting unit ($580,000) is greater than the carrying value of the investment ($550,000). Thus, goodwill is not impaired Goodwill of $150,000 will be reported.