On January 1, 2023, Porsche Company acquired 100% of Saab Company’s stock for $450,000 cash. The fair value of Saab’s identifiable net assets was $375,000 on this date. Porsche Company decided to measure goodwill impairment using comparable prices of similar businesses to estimate the fair value of the reporting unit (Saab). The information for these subsequent years is as follows:

Required:
A. For each year determine the amount of goodwill impairment, if any. Hint: You may wish to refer back to the section entitled Goodwill Impairment Test in Chapter 2.
B. Prepare the workpaper entries needed each year (2024 through 2026) on the consolidating worksheet to record any goodwill impairment assuming:
1. The cost or partial equity method is used.
2. The complete equity method is used.

Transcribed Image Text:

Year 2024 2025 2026 Present Value of Future Cash Flows Carrying Value of Saab's Identifiable Net Assets* $400,000 $400,000 $350,000 * Identifiable net assets do not include goodwill. $330,000 $320,000 $300,000 Fair Value of Saab's Identifiable Net Assets $340,000 $345,000 $325,000