On April 15, 2016, Oderin Inc. (Oderin) purchased 100 percent of the common shares of Bellburn Ltd.
Question:
On April 15, 2016, Oderin Inc. (Oderin) purchased 100 percent of the common shares of Bellburn Ltd. (Bellburn) for $16,000,000. At the time of the purchase, Oderin's management made the following estimates of the fair values of Bellburn's assets and liabilities:
Current assets ......................$7,000,000
Tangible capital assets........ 17,000,000
Patents.................................... 3,500,000
Current liabilities ...................4,750,000
Long-term debt ...................10,250,000
Required:
a. Calculate the amount of goodwill that Oderin recorded when it purchased Bellburn on April 15, 2016.
b. In fiscal 2020, management determined that the goodwill associated with the purchase of Bellburn was impaired and that it should be written down to $2,500,000. Prepare the journal entry that Oderin would make to record the impairment of the goodwill. What amount would be reported on the fiscal 2020 balance sheet for goodwill and what expense would be reported in the income statement?
GoodwillGoodwill is an important concept and terminology in accounting which means good reputation. The word goodwill is used at various places in accounting but it is recognized only at the time of a business combination. There are generally two types of... Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Step by Step Answer:
a Fair market value ...View the full answer
