Impairment of Intangible Assets

A good summary would include a discussion minimum of approximately three paragraphs in length. No need to be an academic, write this so you understand and comprehend it, pretend you are explaining it to a friend. Have fun, take the opportunity to learn something new about intangibles and impairment!

(1) Giant Corp. purchased Sinks Co. 4 years ago and at that time recorded goodwill of $480,000. The Sinks Divisions net assets, including goodwill, have a carrying amount of $1,150,000. The fair value of the division is estimated to be $1,200,000.

(a) Explain whether or not Giant Corp. must prepare an entry to record impairment of the goodwill. Include the entry, if necessary.

(b) Repeat instruction (a) assuming that the fair value of the division is estimated to be $1,070,000 and the implied goodwill is $360,000.