Company pays $ $1$ comma $560$ comma $000$ to acquire $100\%$ of the common stock of Cornish Incorporated. It assumes that Cornish's plant assets$($such as the factory building and$$ land$)$ are undervalued by $ $40$ comma $000.$ The historical cost of the net assets$$ acquired, excluding$$ goodwill, is equal to $ $1$ comma $500$ comma $000.$ Cornish will be held as a division of Brigatti. The following information is available $1$ year after the acquisition of the subsidiary company$($i$.$e$.,$ the reporting$$ unit$)$:

Description

Debit

Credit

Cash

$$200,000$

Inventory

$300,000$

Property, plant, and equipment, net

$1,500,000$

Goodwill

$20,000$

Current liabilities

$$400,000$

Common stock $-$ no par

$340,000$

Retained earnings

$1,280,000$

Totals

$$2,020,000$

$$2,020,000$ estimated the fair$($appraisal$)$ value of the$$ division's net assets$($excluding goodwill$)1$ year after the date of acquisition at $ $1$ comma $605$ comma $000.$ Assume that Brigatti Company is an IFRS reporter and that Cornish Division is a$$ cash$-$generating unit. Assume that costs to sell the unit are zero. Determine whether goodwill is impaired assuming that the fair value of the Cornish Division with goodwill $1$ year after acquisition is equal to $ $2$ comma $000$ comma $000$ and its value in use $1$ year after acquisition was $ $1$ comma $712$ comma $000.$ Provide the impairment journal$$ entry, if necessary.

b$.$

Determine whether goodwill is impaired assuming that the fair value of the Cornish Division with goodwill $1$ year after acquisition is equal to $ $1$ comma $608$ comma $000$ and value in use $1$ year after acquisition was $ $1$ comma $612$ comma $000.$ Provide the impairment journal$$ entry, if necessary. Requirement a$.$ Determine whether goodwill is impaired assuming that the fair value of the Cornish Division with goodwill $1$ year after acquisition is equal to $ $2$ comma $000$ comma $000$ and its value in use $1$ year after acquisition was $ $1$ comma $712$ comma $000.$ Provide the impairment journal$$ entry, if necessary.

Start with Part $1-$ assess recoverability.

Part $1$:

Goodwill

$$

Recoverable amount

Part $2$

Now begin Part $2$ of the impairment test for goodwill. Determine whether impairment is indicated.

Part $2$:

Goodwill

Impairment indicated

Part $3$

$$Next$,$ complete Part $2$ of the impairment test for goodwill. Select whether Part $2$ of the test is required on the first line. $($If the test is not$$ required, leave all remaining cells blank.$$ However, if the test is$$ required, but no impairment loss$$ exists, then leave only the impairment loss input cell blank. Use a minus sign or parentheses for any loss$$ amounts.$)$

Part $2$:

Goodwill

Part $2$ required

Less:

Impairment loss

Part $4$

Now prepare the journal entry to record the impairment$$ loss, if necessary. $($Record debits$$ first, then credits. Exclude explanations from any journal entries. If no entry is required select$"$No Entry$$ Required" on the first line of the journal entry table and leave all remaining cells in the table$$ blank.$)$

Account

Date of impairment

Part $5$

Requirement b$.$ Determine whether goodwill is impaired assuming that the fair value of the Cornish Division with goodwill $1$ year after acquisition is equal to $ $1$ comma $608$ comma $000$ and value in use $1$ year after acquisition was $ $1$ comma $612$ comma $000.$ Provide the impairment journal$$ entry, if necessary.

Start with Part $1-$ assess recoverability.

Part $1$:

Goodwill

Recoverable amount

Part $6$

Now begin Part $2$ of the impairment test for goodwill. Determine whether impairment is indicated.

Part $2$:

Goodwill

Impairment indicated

Part $7$

$$Next$,$ complete Part $2$ of the impairment test for goodwill. Select whether Part $2$ of the test is required on the first line. $($If the test is not$$ required, leave all remaining cells blank.$$ However, if the test is$$ required, but no impairment loss$$ exists, then leave only the impairment loss input cell blank. Use a minus sign or parentheses for any loss$$ amounts.$)$

Part $2$:

Goodwill

Part $2$ required

Less:

Impairment loss

Part $8$

Now prepare the journal entry to record the impairment$$ loss, if necessary. $($Record debits$$ first, then credits. Exclude explanations from any journal entries. If no entry is required select$"$No Entry$$ Required" on the first line of the journal entry table and leave all remaining cells in the table$$ blank.$)$