Haynes, Inc., obtained 100 percent of Turner Companys common stock on January 1, 2020, by issuing 10,700 shares of $10 par value common stock. Hayness shares had a $15 per share fair value. On that date, Turner reported a net book value of $114,800. However, its equipment (with a five-year remaining life) was undervalued by $8,800 in the companys accounting records. Also, Turner had developed a customer list with an assessed value of $36,900, although no value had been recorded on Turners books. The customer list had an estimated remaining useful life of 10 years.

The following balances come from the individual accounting records of these two companies as of December 31, 2020:

On January 1, Palisades, Inc., acquired 100 percent of Sherwood Companys common stock for a fair value of $120,340,000 in cash and stock. The carrying amounts of Sherwoods assets and liabilities equaled their fair values except for its equipment, which was undervalued by $534,000 and had a 10-year remaining life.

Palisades specializes in media distribution and viewed its acquisition of Sherwood as a strategic move into content ownership and creation. Palisades expected both cost and revenue synergies from controlling Sherwoods artistic content (a large library of classic movies) and its sports programming specialty video operation. Accordingly, Palisades allocated all of Sherwoods assets and liabilities (including all $49,745,000 of goodwill recognized in the acquisition) to a newly formed operating segment appropriately designated as a reporting unit.

However, Sherwoods assets have taken longer than anticipated to produce the expected synergies with Palisadess operations. Accordingly, Palisades reviewed events and circumstances and concluded that Sherwoods fair value was likely less than its carrying amount. At year-end, Palisades assessed the Sherwood reporting units fair value to $110,340,000.

At December 31, Palisades and Sherwood submitted the following balances for consolidation. There were no intra-entity payables on that date. Also, Palisades had not yet recorded any goodwill impairment.

	Palisades, Inc.			Sherwood Co.
Revenues	$	(18,570,000	)	$	(12,340,000	)
Operating expenses		10,350,000			12,140,000
Equity in Sherwood's earnings		(146,600	)
Dividends declared		385,000			114,000
Retained earnings, 1/1		(52,510,000	)		(2,391,000	)
Cash		396,000			126,000
Receivables (net)		244,000			914,000
Investment in Sherwood		120,372,600
Broadcast licenses		435,000			14,048,000
Movie library		450,000			45,340,000
Equipment (net)		131,170,000			17,670,000
Current liabilities		(202,000	)		(735,000	)
Long-term debt		(22,000,000	)		(7,420,000	)
Common stock		(170,170,000	)		(67,670,000	)

1. What is the relevant test to determine whether goodwill is impaired?

2. How did Palisades determine Sherwood's December 31 carrying amount of $120,372,600?

3. At what amount should Palisades record an impairment loss for its Sherwood reporting unit for the year?

4. What is consolidated net income for the year?

5. What is the December 31 consolidated balance for goodwill?

6. Prepare a consolidated worksheet for Palisades and Sherwood (Palisadess trial balance should first be adjusted for any appropriate impairment loss).

The following balances come from the individual accounting records of these two companies as of December 31, 2021:

	Haynes			Turner
Revenues	$	(831,000	)	$	(440,000	)
Expenses		477,600			242,500
Investment income		Not given			0
Dividends declared		120,000			60,000
Equipment		546,000			360,000

1. a. What balance does Hayness Investment in Turner account show on December 31, 2021, when the equity method is applied?

2. b. What is the consolidated net income for the year ending December 31, 2021?

3. c-1. What is the consolidated equipment balance as of December 31, 2021?

4. c-2. Would this answer be affected by the investment method applied by the parent?

5. d. Prepare entry *C for the beginning of the Retained Earnings account on a December 31, 2021 by using initial value, partial equity and equity method.