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Item 3

Item 3 9.09 points

Problem 3-16 (LO 3-6)

Francisco Inc. acquired 100 percent of the voting shares of Beltran Company on January 1, 2017. In exchange, Francisco paid $623,000 in cash and issued 113,000 shares of its own $1 par value common stock. On this date, Franciscos stock had a fair value of $12 per share. The combination is a statutory merger with Beltran subsequently dissolved as a legal corporation. Beltrans assets and liabilities are assigned to a new reporting unit.

The following reports the fair values for the Beltran reporting unit for January 1, 2017, and December 31, 2018, along with their respective book values on December 31, 2018.

Beltran Reporting Unit	Fair Values 1/1/17			Fair Values 12/31/18			Book Values 12/31/18
Cash	$	126,500		$	92,500		$	92,500
Receivables		238,500			277,500			277,500
Inventory		313,750			360,000			354,500
Patents		618,500			712,000			576,500
Customer relationships		689,250			648,000			603,500
Equipment (net)		368,000			295,000			289,100
Goodwill		?			?			420,000
Accounts payable		(216,500	)		(274,000	)		(274,000	)
Long-term liabilities		(579,000	)		(506,000	)		(506,000	)

1. Prepare Franciscos journal entry to record the assets acquired and the liabilities assumed in the Beltran merger on January 1, 2017.

2. On December 31, 2018, Francisco opts to forgo any goodwill impairment qualitative assessment and estimates that the total fair value of the entire Beltran reporting unit is $1,714,500. What amount of goodwill impairment, if any, should Francisco recognize on its 2018 income statement?