Question
K Company acquired 80 percent of the outstanding shares of Duo Company by paying $420,000 in cash. The fair value of Duos identifiable assets is
K Company acquired 80 percent of the outstanding shares of Duo Company by paying $420,000 in cash. The fair value of Duos identifiable assets is $630,000, and the liabilities assumed by K Co. in this business combination are $205,000.
a)K Co. must conduct an impairment test of the goodwill related to the acquisition of Duo. The assets of Duo are the smallest group of assets that generate cash inflows, and it is a separate cash generating unit. K. Co estimated the following items:
Fair value less costs to sell is $ 370,000
Present value of future cash flows is $350,000
Please calculate the impairment loss that should be recorded on I/S.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started