10. Conduct a goodwill impairment test Goldhanmer Building Produch distibutes various building prodactstonew home builders through the United States. Goldhammer has begun to see a decrease in building of new homes. As part of Goldhammer's long-term strategic plan, Goldhammer's managemernt negotiated to purchase Martin Home Renovations in order to diversify Goldhammer's product offerings and customer base. Martin provides home renovation services as well as distributing various building products used in the home renovation industry. Goldhammer are both organized and taxed as Subchapter S corporations and have December 31 year-ends. At the close of December 31, 2016, the two companies consummated their agreemen whereby Goldhammer would purchase Martin's common stock for $40,000,000 in cash and a $10,000,000 note payable to the sellers of Martin. Goldhammer engaged an appraiser to determine the fair value of Martin's fixed assets and intangibles other than goodwill as of December 31, 2016. Martin's books reflect those values. Current Situation: During 2018, Goldhammer and Martin have continued to see a downturn in both new housing starts and the home renovation industry. During the audit planning meeting with Goldhammer's external auditors, the carrying value of Martin's intangibles was discussed. To address the Goldhammer's auditor's concerns regarding potential impairment Goldhammer has engaged a valuation firm to assist it in deternining, at December 31, 2018, the fair value of both Martin as a whole, and Martin's intangible assets. The valuation firm report detailed out the following fair values as of December 31, 2018: Fair value of Martin Customer relationships Tradename Noncompete Agreement S30,000,000 S7,500,000 $3,000,000 $250.000 Assets Current assets Martin Home Renovations Balance Sheet December 31, 2018 Cash Accounts receivable 75,000 12,000.000 ory Prepaid expenses 16,000,000 100 000 28.175,000 Total current assets Property and equipment 1.000,000 3,500,000 885,000 Buildings and improvements ransportation Equipment Computer Equipment Furniture and Fixtures 125,000 175,000 5,685,000 950,000 Less accumulated depreciation 4.735,000 18,040.000 Goodwill Intangible assets 6,375,000 2,000,000 r relationships, net of accunnulated amortization of $2.125,000 Tradename, net of accumulated amortization of 500,000 Non-compete agreements, net of accumulated amortization of $1,000,000 750.000 9,125,000 350,000 Other assets Total Assets 60.425.000 Liabilities and stockholders' equity Current Liabilities Note payable, bank Note payable, former shareholder, Martin Accounts payable Accrued expenses 8,000,000 2,000,000 3,000,000 2.375,00 15,375,000 Total current liabilities Long-term liabilities Note payable, former shareholder, Martin Deferred Compensation 4,000,000 5.200,000 9.200.,000 Stockholders' equity Common stock Additional paid in capital Retained earnings 10,000 41.340,000 (5,500,000) Total liabilities and stockholders' equity 35.850,000 60 425,000 usal firm that performed the original fixed asset a set appra Goldhammer also asked ti mppra to perform an update of its work. The appraised values of the fixed assets as of Decemibel 31, 2018 were determined to be as follows $1,100,000 $3,400,000 S775,000 $100.000 S125,000 .Land Buildings Transportation equipment . Computer equipment Furniture and fixtures Goldhammer's management has determined that Martin is a separate and stand-alone reporting unit, and Goldhammer's external auditors have concurred with that assessment Assume that all other assets and liabilities not discussed above have carrying values that egual fair value at December 31, 2018. Martin's December 31, 2018, balance sheet before considering the above valuation is below. Conduct a goodwill impairment analysis of Martin as of December 31.2018 following these steps. For each step, show your calculations and analysis. Also, include a citation for the relevant paragraphs in the Codification that correspond to steps 1)-3) these 1) Compare fair value of the reporting unit with its carrying amount. 2) Calculate the implied value of goodwill. 3) Measure the impairment loss. 4) Prepare the journal entry to record the impairment loss, if any 10. Conduct a goodwill impairment test Goldhanmer Building Produch distibutes various building prodactstonew home builders through the United States. Goldhammer has begun to see a decrease in building of new homes. As part of Goldhammer's long-term strategic plan, Goldhammer's managemernt negotiated to purchase Martin Home Renovations in order to diversify Goldhammer's product offerings and customer base. Martin provides home renovation services as well as distributing various building products used in the home renovation industry. Goldhammer are both organized and taxed as Subchapter S corporations and have December 31 year-ends. At the close of December 31, 2016, the two companies consummated their agreemen whereby Goldhammer would purchase Martin's common stock for $40,000,000 in cash and a $10,000,000 note payable to the sellers of Martin. Goldhammer engaged an appraiser to determine the fair value of Martin's fixed assets and intangibles other than goodwill as of December 31, 2016. Martin's books reflect those values. Current Situation: During 2018, Goldhammer and Martin have continued to see a downturn in both new housing starts and the home renovation industry. During the audit planning meeting with Goldhammer's external auditors, the carrying value of Martin's intangibles was discussed. To address the Goldhammer's auditor's concerns regarding potential impairment Goldhammer has engaged a valuation firm to assist it in deternining, at December 31, 2018, the fair value of both Martin as a whole, and Martin's intangible assets. The valuation firm report detailed out the following fair values as of December 31, 2018: Fair value of Martin Customer relationships Tradename Noncompete Agreement S30,000,000 S7,500,000 $3,000,000 $250.000 Assets Current assets Martin Home Renovations Balance Sheet December 31, 2018 Cash Accounts receivable 75,000 12,000.000 ory Prepaid expenses 16,000,000 100 000 28.175,000 Total current assets Property and equipment 1.000,000 3,500,000 885,000 Buildings and improvements ransportation Equipment Computer Equipment Furniture and Fixtures 125,000 175,000 5,685,000 950,000 Less accumulated depreciation 4.735,000 18,040.000 Goodwill Intangible assets 6,375,000 2,000,000 r relationships, net of accunnulated amortization of $2.125,000 Tradename, net of accumulated amortization of 500,000 Non-compete agreements, net of accumulated amortization of $1,000,000 750.000 9,125,000 350,000 Other assets Total Assets 60.425.000 Liabilities and stockholders' equity Current Liabilities Note payable, bank Note payable, former shareholder, Martin Accounts payable Accrued expenses 8,000,000 2,000,000 3,000,000 2.375,00 15,375,000 Total current liabilities Long-term liabilities Note payable, former shareholder, Martin Deferred Compensation 4,000,000 5.200,000 9.200.,000 Stockholders' equity Common stock Additional paid in capital Retained earnings 10,000 41.340,000 (5,500,000) Total liabilities and stockholders' equity 35.850,000 60 425,000 usal firm that performed the original fixed asset a set appra Goldhammer also asked ti mppra to perform an update of its work. The appraised values of the fixed assets as of Decemibel 31, 2018 were determined to be as follows $1,100,000 $3,400,000 S775,000 $100.000 S125,000 .Land Buildings Transportation equipment . Computer equipment Furniture and fixtures Goldhammer's management has determined that Martin is a separate and stand-alone reporting unit, and Goldhammer's external auditors have concurred with that assessment Assume that all other assets and liabilities not discussed above have carrying values that egual fair value at December 31, 2018. Martin's December 31, 2018, balance sheet before considering the above valuation is below. Conduct a goodwill impairment analysis of Martin as of December 31.2018 following these steps. For each step, show your calculations and analysis. Also, include a citation for the relevant paragraphs in the Codification that correspond to steps 1)-3) these 1) Compare fair value of the reporting unit with its carrying amount. 2) Calculate the implied value of goodwill. 3) Measure the impairment loss. 4) Prepare the journal entry to record the impairment loss, if any