1. (Goodwill, Impairment) On March 31, 2020, Rodeo Company paid $6,000,000 to acquire all the common stock of Drive Incorporated, which became a division of Rodeo. Drive reported the following balance sheet at the time of the acquisition: Current assets $2,400,000 Current liabilities $ 500,000 Noncurrent assets 3,200,000 Long-term liabilities 300,000 Total assets $5,600,000 Stockholders equity 4,800,000 Total liabilities and equity $5,600,000 It was determined at the date of the purchase that the fair value of the identifiable net assets of Drive was $4,500,000. Additional balance sheet information: Current assets $1,600,000 Noncurrent assets (including goodwill recognized in purchase) 3,800,000 Current liabilities (600,000) Long-term liabilities (400,000) Net assets $4,400,000 Finally, it is determined that the fair value of the Drive Division is $4,300,000.

Instructions

1. Compute the amount of goodwill recognized, if any, on March 31, 2020.
2. Determine the impairment loss, if any, to be recorded on December 31, 2020.
3. Assume that fair value of the Drive Division is $4,000,000 instead of $4,300,000. Determine the impairment loss, if any, to be recorded on December 31, 2020.
4. Prepare the journal entry to record the impairment loss, if any, and indicate where the loss would be reported in the income statement.