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

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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:

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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.)

Goodwill
Goodwill is an important concept and terminology in accounting which means good reputation. The word goodwill is used at various places in accounting but it is recognized only at the time of a business combination. There are generally two types of...
Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
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Advanced Accounting

ISBN: 978-1119373209

7th edition

Authors: Debra C. Jeter, Paul K. Chaney

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