Arcadia, Inc., acquired 100 percent of the voting shares of Bruno Company on January 1, 2023. In exchange, Arcadia paid $198,000 in cash and issued 100,000 shares of its own $1 par value common stock. On this date, Arcadia’s stock had a fair value of $15 per share. The combination is a statutory merger with Bruno subsequently dissolved as a legal corporation. Bruno’s assets and liabilities are assigned to a new reporting unit.

The following shows fair values for the Bruno reporting unit for January 1, 2023, along with respective carrying amounts on December 31, 2024:

a. Prepare Arcadia’s journal entry to record the assets acquired and the liabilities assumed in the Bruno merger on January 1, 2023.

b. On December 31, 2024, Arcadia opts to forgo any goodwill impairment qualitative assessment and estimates that the total fair value of the entire Bruno reporting unit is $1,325,000. What amount of goodwill impairment, if any, should Arcadia recognize on its 2024 income statement?

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Bruno Reporting Unit Cash Receivables Inventory Patents Royalty agreements Equipment (net) Goodwill Accounts payable Long-term liabilities Fair Values 1/1/23 $ 65,000 203,000 275,000 531,000 580,000 215,000 ? (111,000) (460,000) Carrying Amounts 12/31/24 $ 40,000 235,000 250,000 550,000 450,000 335,000 400,000 (275,000) (425,000)