Rossie Equipment Manufacturing Co. acquired the assets of Alba Inc., a competitor, in 2018. It recorded goodwill

Question:

Rossie Equipment Manufacturing Co. acquired the assets of Alba Inc., a competitor, in 2018. It recorded goodwill of $70,000 at acquisition. Because of defective machinery Alba had produced prior to the acquisition, it has been determined that all of the acquired goodwill has been permanently impaired.

Required

Explain how the recognition of the impairment of the goodwill will affect the 2018 balance sheet, income statement, and statement of cash flows.

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...