Assume that on January 1, 20X2, investors form Acme Corp agree to consolidate the operations of ABC,
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New Corp's Acquisition-Date Fair Values
Reporting Units Goodwill January 1, 20X3
ABC Hot...................$ 22,000,000...................$750,000,000
ABC Cold..................155,000,000.....................748,000,000
DEF Company...............38,000,000.....................502,000,000
In December, 20X3, Acme Corp performed an analysis for each of its three reporting units to assess potential goodwill impairment. They examined the events that may affect the fair values of its reporting units. The analysis reveals that the fair value of each reporting unit likely exceeds its carrying amount except for ABC Cold. The goodwill impairment test then reveals that ABC Cold's fair value has fallen to $70 million, well below its current carrying amount. Acme compared the implied fair value of ABC Cold's goodwill to its carrying amount. Acme needs to determine the implied fair value of goodwill. The fair value of ABC Cold's net assets as of December 31, 21X3 is shown below.
ABC Cold December 31, 20X3, fair value $70,000,000
Fair values of ABC Cold net assets at December 31, 20X3:
Current assets..................................................$ 5,000,000
Property.........................................................40,000,000
Equipment......................................................15,000,000
Subscriber list...................................................10,000,000
Patented technology............................................1,000,000
Current liabilities..............................................(4,000,000)
Long-term debt..............................................(10,000,000)
Required:(1) What is the implied fair value of goodwill for ABC Cold?
(2) What is the carrying value of goodwill of ABC Cold before impairment?
(3) What is the impairment loss of ABC Cold?
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...
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Related Book For
Taxation Of Individuals And Business Entities 2015
ISBN: 9780077862367
6th Edition
Authors: Brian Spilker, Benjamin Ayers, John Robinson, Edmund Outslay, Ronald Worsham, John Barrick, Connie Weaver
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