Springhill Co. purchased the assets of Canyon Co. for \($1,000,000\) in 2005. The estimated fair market value of the assets at the purchase date was \($920,000\). Goodwill of \($80,000\) was recorded at purchase. In 2007, because of negative publicity, one-half of the goodwill purchased from Canyon Co. was judged to be permanently impaired.

Required:

Explain how the recognition of the impairment of the goodwill will affect the 2007 balance sheet, income statement, and statement of cash flows.