On January 1, 2018, Porsche Company acquired the net assets of Saab Company for $450,000 cash. The

Question:

On January 1, 2018, Porsche Company acquired the net assets of Saab Company 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 the present value of future cash flows to estimate the fair value of the reporting unit (Saab). The information for these subsequent years is as follows:

Required:

Part A: For each year determine the amount of goodwill impairment, if any using FASB?s simplified approach (assume that either the qualitative test is satisfied or bypassed).

Part B: Prepare the journal entries needed each year to record the goodwill impairment (if any) on Porsche?s books from 2019 to 2021.

Part C: How should goodwill (and its impairment) be presented on the balance sheet and the income statement in each year?

Part D: If goodwill is impaired, what additional information needs to be disclosed?

Part E: Optional. If the firm has not yet adopted the new simplified rules on goodwill impairment and uses the two-step approach. Determine the amount of goodwill impairment (Illustration 2?1 is available from your instructor.)

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