Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Alfonso Inc. acquired 100 percent of the voting shares of BelAire Company on January 1, 2020. In exchange, Alfonso paid $237,750 in cash and issued

Alfonso Inc. acquired 100 percent of the voting shares of BelAire Company on January 1, 2020. In exchange, Alfonso paid $237,750 in cash and issued 100,000 shares of its own $1 par value common stock. On this date, Alfonsos stock had a fair value of $15 per share. The combination is a statutory merger with BelAire subsequently dissolved as a legal corporation. BelAires assets and liabilities are assigned to a new reporting unit.

The following shows fair values for the BelAire reporting unit for January 1, 2020 along with respective carrying amounts on December 31, 2021.

BelAire Reporting Unit Fair Values 1/1/20 Carrying Amounts 12/31/21
Cash $ 71,000 $ 42,000
Receivables 182,750 237,000
Inventory 218,000 252,000
Patents 519,000 616,000
Customer relationships 621,500 592,000
Equipment (net) 329,500 273,000
Goodwill ? 586,000
Accounts payable (105,500 ) (186,000 )
Long-term liabilities (684,500 ) (588,000 )

Note: Parentheses indicate a credit balance.

Prepare Alfonsos journal entry to record the assets acquired and the liabilities assumed in the BelAire merger on January 1, 2020. Note: Enter cash paid and cash received as two separate amounts.

On December 31, 2021, Alfonso opts to forgo any goodwill impairment qualitative assessment and estimates that the total fair value of the entire BelAire reporting unit is $1,640,000. What amount of goodwill impairment, if any, should Alfonso recognize on its 2021 income statement?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Sarbanes Oxley And The New Internal Auditing Rules

Authors: Robert R. Moeller

1st Edition

0471483060, 978-0471483069

More Books

Students also viewed these Accounting questions

Question

Discuss consumer-driven health plans.

Answered: 1 week ago