Luna Company is an IFRS reporter. Luna Company acquired 100% of the voting stock of the AutoMania Group on January 1 of the current year for a total acquisition cost of $251,000. The trial balance of AutoMania on the date of acquisition follows.

Requirement a. Compute the amount of goodwill to be recorded on the date of acquisition.

Less:
Goodwill

Requirement b. Conduct the impairment test for goodwill at the end of the year, one year after the acquisition. Assume no changes in the reporting unit's assets and liabilities except for depreciation and amortization. (Abbreviations used: CGU = cash-generating unit.)

Start with part 1.

Part 1:	Goodwill
Recoverable amount of the CGU

Now complete part 2 of the impairment test for goodwill and identify any impairment loss. (If you selected "No" that an impairment loss is not indicated, then leave the impairment loss input cell blank. Abbreviations used: CGU = cash-generating unit.)

Part 2:	Goodwill
Impairment loss indicated
Impairment loss, if any

Requirement c. Conduct the impairment tests indicated for assets other than goodwill at the end of the year, one year after the acquisition. (Use the present value and future value tables, the formula method, a financial calculator, or a spreadsheet for your calculations. If using present and future value tables or the formula method, use factor amounts rounded to five decimal places, X.XXXXX. Round intermediary calculations for each year and your final answers to the nearest whole dollar.)

Start with part 1.

	Plant and	Finite-life	Customer
Part 1:	Equipment	Intangible Assets	List
Recoverable amount

Now complete part 2 of the impairment test for assets other than goodwill. For each asset group, complete the test and then select on the third line whether an impairment is indicated. If impairment is not indicated, leave the impairment loss cell blank. (If a box is not used in the table, leave the box empty; do not enter a zero. Round your final answer for each asset group to the nearest whole dollar.)

	Plant and	Finite-life	Customer
Part 2:	Equipment	Intangible Assets	List
Impairment indicated
Impairment loss, if any

Requirement d. Prepare the journal entries required to record any impairment losses computed in parts (b) and (c). (Record debits first, then credits. Exclude explanations from any journal entries. If no entry is required select "No Entry Required" on the first line of the journal entry table and leave all remaining cells in the table blank.)

First record any impairment loss on goodwill calculated in Requirement b.

Account	Date of impairment

Record any impairment loss on plant and equipment calculated in Requirement c.

Account	Date of impairment

Record any impairment loss on finite-life intangibles calculated in Requirement c. (Assume

Luna

Company makes amortization entries to the applicable accumulated amortization account.)

Account	Date of impairment

Record any impairment loss on the customer list calculated in Requirement c.

Account	Date of impairment

Debit Credit $ 33,000 172,000 Description Investment securitiesheld to maturity Plant and equipment-net Intangible assets-net Long-term debt Contributed capital 79,000 $ 90,000 68,000 126,000 Retained earnings $ 284,000 $ 284,000 Total Print Done The AutoMania Group acquired the intangible assets 3 years ago. It amortizes the assets using the straight-line method with no estimated residual value. The appraisal of the subsidiary's net assets on the date of acquisition indicated that the following adjustments were required: Description Book Value Fair Value Adjustment Plant and equipment-net $ 172,000 $ 184,000 $ 12,000 Customer list 40,000 40,000 Long-term debt (90,000) (96,000) (6,000) $ 82,000 $ 128,000 $ 46,000 Total Net Assets Print Done On December 31 (1 year after the acquisition), Luna's management conducted its annual impairment test for goodwill. Management has also assessed recent events and determined that it should review its plant and equipment and finite-life intangible assets for possible impairment. Management determines AutoMania to be the reporting unit, which is also the cash-generating unit. Management estimated that the fair value of the unit (AutoMania) with goodwill 1 year after the acquisition was $288,000; its value in use was $298,000; and the costs to sell were $29,000. The net assets of the unit, excluding goodwill, were appraised at $281,000. Assume that annual depreciation is $4,300, annual amortization for the customer list is $800, and the annual amortization for the other intangible assets is $3,950. Luna uses separate accounts for accumulated depreciation and accumulated amortization. Treat the customer list as a finite-life intangible asset. Management is unable to determine fair values for the reporting unit's assets, but it estimates the following future cash flows for each of the unit's assets, with the exception of goodwill. Assume that Luna's cost of capital is 10%. (Assume that the future cash flows occur at the end of each year.) Future Plant and Finite-life Customer Period Equipment Intangible Assets List Year 1 $ 50,600 $ 11,100 $ 16,000 Year 2 39,000 10,300 Year 3 19,200 14,600 8,500 7,800 14,400 10,400 9,400 Year 4 Year 5 0 6,400 Year 6 0 6,900 3,100 8,000 5,400 3,800 0 Year 7 $ 123,400 $ 54,100 $ Total 67,400 Data Table Plant and Finite-Life Customer List at the en Equipment Intangible Assets $ 120,000 $ 38,000 $ ept Current selling price (less costs to sell) 49,000 Print Done Debit Credit $ 33,000 172,000 Description Investment securitiesheld to maturity Plant and equipment-net Intangible assets-net Long-term debt Contributed capital 79,000 $ 90,000 68,000 126,000 Retained earnings $ 284,000 $ 284,000 Total Print Done The AutoMania Group acquired the intangible assets 3 years ago. It amortizes the assets using the straight-line method with no estimated residual value. The appraisal of the subsidiary's net assets on the date of acquisition indicated that the following adjustments were required: Description Book Value Fair Value Adjustment Plant and equipment-net $ 172,000 $ 184,000 $ 12,000 Customer list 40,000 40,000 Long-term debt (90,000) (96,000) (6,000) $ 82,000 $ 128,000 $ 46,000 Total Net Assets Print Done On December 31 (1 year after the acquisition), Luna's management conducted its annual impairment test for goodwill. Management has also assessed recent events and determined that it should review its plant and equipment and finite-life intangible assets for possible impairment. Management determines AutoMania to be the reporting unit, which is also the cash-generating unit. Management estimated that the fair value of the unit (AutoMania) with goodwill 1 year after the acquisition was $288,000; its value in use was $298,000; and the costs to sell were $29,000. The net assets of the unit, excluding goodwill, were appraised at $281,000. Assume that annual depreciation is $4,300, annual amortization for the customer list is $800, and the annual amortization for the other intangible assets is $3,950. Luna uses separate accounts for accumulated depreciation and accumulated amortization. Treat the customer list as a finite-life intangible asset. Management is unable to determine fair values for the reporting unit's assets, but it estimates the following future cash flows for each of the unit's assets, with the exception of goodwill. Assume that Luna's cost of capital is 10%. (Assume that the future cash flows occur at the end of each year.) Future Plant and Finite-life Customer Period Equipment Intangible Assets List Year 1 $ 50,600 $ 11,100 $ 16,000 Year 2 39,000 10,300 Year 3 19,200 14,600 8,500 7,800 14,400 10,400 9,400 Year 4 Year 5 0 6,400 Year 6 0 6,900 3,100 8,000 5,400 3,800 0 Year 7 $ 123,400 $ 54,100 $ Total 67,400 Data Table Plant and Finite-Life Customer List at the en Equipment Intangible Assets $ 120,000 $ 38,000 $ ept Current selling price (less costs to sell) 49,000 Print Done