Anton Company acquired the net assets of Hair Company on January 1, 2011, for $600,000. Using a business valuation model, the estimated value of Anton Company was $650,000 immediately after the acquisition. The fair value of Anton’s net assets was $400,000.
1. What amount of goodwill was recorded by Anton Company when it acquired Hair Company?
2. Using the information on page 41, answer the questions posed in the following two independent situations:
a. On December 31, 2012, there were indications that goodwill might have been impaired. At that time, the existing recorded book value of Anton Company’s net assets, including goodwill, was $500,000. The fair value of the net assets, exclusive of goodwill, was estimated to be $340,000. The value of the business was estimated to be $520,000. Is good-will impaired? If so, what adjustment is needed?
b. On December 31, 2014, there were indications that goodwill might have been impaired. At that time, the existing recorded book value of Anton Company’s net assets, including goodwill, was $450,000. The fair value of the net assets, exclusive of goodwill, was estimated to be $340,000. The value of the business was estimated to be $400,000. Is good-will impaired? If so, what adjustment is needed?