Kraker lnc., is a calendar-year private company that is not required to register with the SEC. It operates five different restaurant chains, two of which are fast-food chains and three of which provide higher-end dining experiences. On January 2. 2017, Kraker engaged in a business combination that resulted in its recording goodwill of $1 million. At that time, Kraker made the accounting policy elective provided in ASC 350-20-15-4 to utilize the accounting alternative. Kraker also elected to test for goodwill impairment at the entity level and estimated the useful life of the goodwill to be 10 years. Kraker does not utilize the option to do a qualitative assessment of goodwill as part of its impairment testing.
During 2019, there was a general downturn in the economy. Although the downturn did not have a significant effect on the fast -food chains, the revenues. net income, and ca sh flows from the three higher-end chains have declined dramatically. Thus, the financial performance of the firm as a whole has experienced a significant downturn.
The carrying value of the net assets of Kraker, excluding goodwill, is $15 million as of December 31, 2019. The fair value of the entity (including goodwill) is $14.8 million as of December 31. 2019. Prepare a memo to the file related to Kraker's goodwill as of December 31, 2019. Use the Codification for support.