Question
Four years ago, Trudy Trumpet Co., a firm specializing in musical instrument manufacturing in the Midwest, acquired all of the voting stock of Conservatory Company,
Four years ago, Trudy Trumpet Co., a firm specializing in musical instrument manufacturing in the Midwest, acquired all of the voting stock of Conservatory Company, a maker of fine Pacific Redwood reeds. At that time, Trudy recognized $500,000 of goodwill. All of this amount is assigned to Conservatory, a reporting unit that is not integrated with the other activities of the consolidated entity. In the current year, the controller for Trudy Trumpet reviewed an analysts data and was concerned about the following:
Carrying amounts of Conservatory's net assets, including goodwill | $2,400,000 |
Conservatory's fair value | 1,900,000 |
Fair value of Conservatory's identifiable net assets (excluding goodwill) | 1,500,000 |
Accordingly, Trudy chose to forgo the qualitative assessment of goodwill. Instead, it directly tested goodwill for impairment.
Indicate the journal entry, if any, necessary for the appropriate treatment of Conservatory's goodwill.
To prepare each required journal entry:
- Click on a cell in the Account Name column and select from the option list the appropriate account. An account may be used once, more than once, or not at all.
- Enter the corresponding debit or credit amount in the associated column.
- Round all amounts to the nearest whole number.
- Not all rows in the table might be needed to complete each journal entry.
- If no journal entry is needed, check the No entry required box at the top of the table as your response.
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