On January 1, 2015, Bad Ltd acquired all assets and liabilities of Wolf Ltd. Wolf Ltd has
Question:
On January 1, 2015, Bad Ltd acquired all assets and liabilities of Wolf Ltd. Wolf Ltd has a number of business segments, including one whose main industry is the manufacture of toy trains, particularly those of historical importance. The toy trains division is considered a NYB. Bad Ltd, which paid $2 million for Wolf Ltd's net assets, calculated that it had goodwill of $240,000.
Goodwill is allocated to each of the segments and the assets and liabilities acquired are measured at their fair value at the acquisition date.
As of 31 December 2018, the book values of the assets of the toy train division are as follows:
Factory | 400 000 $ |
Accumulated depreciation – factory | (150 000) |
Inventory | 150 000 $ |
Brand - 'Frog' | 50 000 $ |
Goodwill | 50 000 $ |
Total | 500 000 |
Interest in toy trains is dwindling due to the aggressive marketing of computer-based toys, so on December 31, 2018, Bad Ltd management measured the use value of the toy train segment at $423,000.
Necessary
Prepare the journal entries to recognize the impairment loss at December 31, 2018.
Expert Answer:
The impairment loss is calculated as the difference between the carrying value of ... View the full answer
