On May 31, 2004, Porter Company paid $2,100,000 to acquire all of the common stock of Dryer
Question:
Current assets ............. $ 500,000Noncurrent assets ........... 1,800,000Total assets ............... $2,300,000Current liabilities ............. $ 400,000Long-term liabilities ............ 300,000Stockholders equity ............ 1,600,000Total liabilities and stock holders equity .... $2,300,000
It was determined at the date of the purchase that the fair value of the identifiable net assets of Dryer was $1,800,000. At December 31, 2004, Dryer reports the following balance sheet information:
Current assets ........................... $ 400,000Noncurrent assets (including goodwill recognized in purchase) .... 1,600,000Current liabilities .......................... (500,000)Long-term liabilities ......................... (300,000)Net assets ......................... . $ 1,200,000
It is determined that the fair market value of the Dryer division is $1,250,000. The recorded amount for Dryer’s net assets (excluding goodwill) is the same as fair value, except for property, plant, and equipment, which has a fair value of $150,000 above the carrying value.
Instructions (a) Compute the amount of goodwill recognized, if any, on May 31, 2004.
(b) Determine the impairment loss, if any, to be recorded on December 31, 2004.
(c) Assume that the fair value of the Dryer division is $1,100,000 instead of $1,250,000. Prepare the journal entry to record the impairment loss, if any, on December 31, 2004.
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... Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... 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...
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Related Book For
Intermediate Accounting
ISBN: 978-1118742976
16th edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield
Question Posted: