Goodwill Impairment On January 1, 2003, Porsche Company acquired 100° of Saab Company’s stock for $450,000 cash. The fair value of Saab’s identifiable net assets was $375,000 on this date. Porsche Company decided to measure goodwill impairment using comparable prices of similar businesses to estimate the fair value of the reporting unit (Saab). The information for these subsequent years is as follows: LO2 Carrying Value of Fair Value of Saab’s Present Value Saab’s Identifiable Identifiable Year of Future Cash Flows Net Assets* Net Assets 2004 $400,000 $330,000 $340,000 2005 $400,000 $320,000 $345,000 2006 $350,000 $300,000 $325,000 ‘Identifiable net assets do not include goodwill.
Required:
Part A: For each year determine the amount of goodwill impairment, if any. Hint: You may wish to refer back to the section entitled Goodwill Impairment Test in Chapter 2.
Part B: Prepare the workpaper entries needed each year (2004 through 2006) on the consolidating worksheet to record any goodwill impairment assuming:
1. The cost or partial equity method is used.
2. The complete equity method is used.