Estimating Goodwill Impairment

On January 1 of the current year, Engel Company purchases 100% of Ball Company for $8.4 million. At the time of acquisition, the fair value of Balls tangible net assets (excluding goodwill) is $8.1 million. Engel ascribes the excess of $300,000 to goodwill. Assume the fair value of Ball declines to $6.25 million and the fair value of Balls tangible net assets is estimated at $6.15 million as of December 31.

a. Determine if the goodwill has become impaired and, if so, the amount of the impairment.

b. What impact does the impairment of goodwill have on Engels financial statements?