On January 1 of the current year, Engel Company purchases (100 %) of Ball Company for ($
Question:
On January 1 of the current year, Engel Company purchases \(100 \%\) of Ball Company for \(\$ 16.8\) million. At the time of acquisition, the fair value of Ball's tangible net assets (excluding goodwill) is \(\$ 16.2\) million. Engel ascribes the excess of \(\$ 600,000\) to goodwill. Assume that the fair value of Ball declines to \(\$ 12.5\) million and that the fair value of Ball's tangible net assets is estimated at \(\$ 12.3\) million as of December 31 .
a. Determine if the goodwill has become impaired and, if so, the amount of the impairment.
b. What impact does the impairment of goodwill have on Engel's financial statements?
Step by Step Answer:
Financial Accounting For MBAs
ISBN: 9781934319345
4th Edition
Authors: Peter D. Easton, John J. Wild, Robert F. Halsey, Mary Lea McAnally