On January 1, 20Y3, The Simmons Group, Inc., purchased the assets of NWS Insurance Co. for $36,000,000,

Question:

On January 1, 20Y3, The Simmons Group, Inc., purchased the assets of NWS Insurance Co. for $36,000,000, a price reflecting an $8,000,000 goodwill premium. On December 31, 20Y9, The Simmons Group determined that the goodwill from the NWS acquisition was impaired and had a value of only $2,300,000.

a. Determine the book value of the goodwill on December 31, 20Y9, prior to making the impairment adjustment.

b. Illustrate the effects on the accounts and financial statements of the December 31, 20Y9, adjustment for the goodwill impairment.

Goodwill
Goodwill 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... Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...