Double Corporation acquired all of the common stock of Simple Company for $450,000 on January 1, 20X4.

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Double Corporation acquired all of the common stock of Simple Company for $450,000 on January 1, 20X4. On that date, Simple’s identifiable net assets had a fair value of $390,000. The assets acquired in the purchase of Simple are considered to be a separate reporting unit of Double. The carrying value of Double’s investment at December 31, 20X4, is $500,000.

Required
Determine the amount of goodwill impairment, if any, that should be recognized at December 31, 20X4, if the fair value of the net assets (excluding goodwill) at that date is $440,000 and the fair value of the reporting unit is determined to be
a. $530,000.
b. $485,000.
c. $450,000.

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...
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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Advanced Financial Accounting

ISBN: 978-0078025624

10th edition

Authors: Theodore E. Christensen, David M. Cottrell, Richard E. Baker

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