1. On January 2, 2017, David Corporation paid $1,200,000 for Buster Company in a transaction properly accounting for as an asset acquisition. The book values and fair values of Buster Companys net assets on January 2, 2017 were as follows:

Book Value Fair Value

Account Receivable 400,000 350,000

Inventory 50,000 65,000

Plant and Equipment 250,000 450,000

Accounts Payable 40,000 50,000

Mortgage Payable 150,000 150,000

510,000 665,000

A. What will be the goodwill recorded from the above transaction? Show your calculation.

B. If David Corporations Accounts Receivable balance immediately prior to the acquisition was $500,000. What will David Corporations Accounts Receivable balance be immediately after the above acquisition? Show your calculation.

2. To determine whether goodwill impairment exists, U.S. GAAP requires a two-step process (complete the statements):

Step 1 Compares F.V. (fair value) of the Reporting Unit to _____________________________.

Step 2 If necessary, first compares the F.V. of the Reporting Unit to _____________________.

3. If goodwill impairment is determined to exist, the entry to record the impairment is as follows:

Debit Credit

Goodwill $xxx

Impairment Loss - Goodwill $xxx

A. True

B. False

Explain your answer: