Martin Home Renovations Balance Sheet December 31, 2018 Current assets 75,000 Cash Accounts receivable 12,000 16,000 28,175 1,000 100,000 Prepaid expenses Total cuurent assets Property and equipment Land 3,500 s85 125,000 175,000 Transportation Equipment Computer Equipment Furniture and Fixhures 5,685,000 950.000- Less accumulated depreciation 4.735.000 Goodwill Intangible assets 18.040,000 6,375,000 2,000,000 750.000 Customer relationships, net of accunmulated amortization of $2,125,000 Tradename, net of accunulated amortization of $500,000 Non-compete agreements, net of accumulated amortization of $1,000,000 350,000 60,425,000 Other assets Total Assets Liabilities and stockholders' equity Current Liabilities Note payable, bank Note payable, former shareholder, Accounts payable Accrued expenses 8,000,000 2,000,000 3,000,000 2.375.000 15,375,000 Martin Total current liabilities Long-term liabilities Note payable, former shareholder, Martin Deferred Compensation 4,000,000 5.200,000 9.200,000 Stockholders' equity Common stock Additional paid in capital Retained eamings 10,000 41.340,000 (5,500,000) Total liabilities and stockholders' equity 35.850,000 60.425,000 aisal firm that performed the original fixed asset appraisals appraised values of the fixed assets as of December Goldhammer also asked to perform an update of its work. The 31, 2018 were determined to be as follows: va S1,100,000 $3,400,000 S775,000 $100,000 $125,000 Land Buildings Transportation equipment Computer equipment Furniture and fixtures Goldhammer's management has determined that Martin is a separate and stand-alone ner's external auditors have concurred with that assessment. bove have carrying values that reporting unit, and Goldhammer Assume that all other assets and liabilities not discussed a egual fair value at December 31, 2018. Martin's December 31, 2018, balance sheet betore considering the above valuation is below. Conduct a good will impairment analysis of Martin as of December 31, 2018 following these steps. For each step, show your calculations and analysis. Also, include a citation for the relevant paragraphs in the Codification that correspond to steps 1)-) on that correspond to steps 1)-3). 1) Compare fair value of the reporting unit with its carrying amoun 2) Calculate the implied value of goodwill. 3) Measure the impairment loss. 4) Prepare the journal entry to record the impairment loss, if any s ior the tone of tlie article? What are the ove 10. Conduct a goodwill impairment test Goldhammer Building Products distributes various building products to ne ing of new through the United States. Goldhammer has begun to see a decrease in building of new Goldhammer's management negotiated to purchase Martin Home Renovations in order to diversi product offerings and customer base. Martin provides home renovations ify Goldhammer erings and customer base. Martin provides home renovation services as g various building products used in the home renovation industry. Goldhan and Martin are both organized and taxed as Subchapter S corporations and have Decem 31 year-ends ember At the close of December 31, 2016, the two companies consummated their agreement whereby Goldhammer would purchase Martin's common stock for $40,000,000 in cash and a $10,000,000 note payable to the sellers of Martin. Goldhammer engaged an appraiser to determine the fair value of Martin's fixed assets and intangibles other than goodwill as of December 31, 2016. Martin's books reflect those values. Current Situation: During 2018, Goldhammer and Martin have continued to see a downturn in both new housing starts and the home renovation industry. During the audit planning meeting with Goldhammer's external auditors, the carrying value of Martin's intangibles was discussed. To address the Goldhammer's auditor's concerns regarding potential impairment, Goldhammer has engaged a valuation firm to assist it in determining, at December 31, 2018, the fair value of both Martin as a whole, and Martin's intangible assets. The valuation firm's report detailed out the following fair values as of December 31, 2018: Fair value of Martin Customer relationships Tradename Noncompete Agreement S30,000,000 $7,500,000 $3,000,000 $250,000 Martin Home Renovations Balance Sheet December 31, 2018 Current assets 75,000 Cash Accounts receivable 12,000 16,000 28,175 1,000 100,000 Prepaid expenses Total cuurent assets Property and equipment Land 3,500 s85 125,000 175,000 Transportation Equipment Computer Equipment Furniture and Fixhures 5,685,000 950.000- Less accumulated depreciation 4.735.000 Goodwill Intangible assets 18.040,000 6,375,000 2,000,000 750.000 Customer relationships, net of accunmulated amortization of $2,125,000 Tradename, net of accunulated amortization of $500,000 Non-compete agreements, net of accumulated amortization of $1,000,000 350,000 60,425,000 Other assets Total Assets Liabilities and stockholders' equity Current Liabilities Note payable, bank Note payable, former shareholder, Accounts payable Accrued expenses 8,000,000 2,000,000 3,000,000 2.375.000 15,375,000 Martin Total current liabilities Long-term liabilities Note payable, former shareholder, Martin Deferred Compensation 4,000,000 5.200,000 9.200,000 Stockholders' equity Common stock Additional paid in capital Retained eamings 10,000 41.340,000 (5,500,000) Total liabilities and stockholders' equity 35.850,000 60.425,000 aisal firm that performed the original fixed asset appraisals appraised values of the fixed assets as of December Goldhammer also asked to perform an update of its work. The 31, 2018 were determined to be as follows: va S1,100,000 $3,400,000 S775,000 $100,000 $125,000 Land Buildings Transportation equipment Computer equipment Furniture and fixtures Goldhammer's management has determined that Martin is a separate and stand-alone ner's external auditors have concurred with that assessment. bove have carrying values that reporting unit, and Goldhammer Assume that all other assets and liabilities not discussed a egual fair value at December 31, 2018. Martin's December 31, 2018, balance sheet betore considering the above valuation is below. Conduct a good will impairment analysis of Martin as of December 31, 2018 following these steps. For each step, show your calculations and analysis. Also, include a citation for the relevant paragraphs in the Codification that correspond to steps 1)-) on that correspond to steps 1)-3). 1) Compare fair value of the reporting unit with its carrying amoun 2) Calculate the implied value of goodwill. 3) Measure the impairment loss. 4) Prepare the journal entry to record the impairment loss, if any s ior the tone of tlie article? What are the ove 10. Conduct a goodwill impairment test Goldhammer Building Products distributes various building products to ne ing of new through the United States. Goldhammer has begun to see a decrease in building of new Goldhammer's management negotiated to purchase Martin Home Renovations in order to diversi product offerings and customer base. Martin provides home renovations ify Goldhammer erings and customer base. Martin provides home renovation services as g various building products used in the home renovation industry. Goldhan and Martin are both organized and taxed as Subchapter S corporations and have Decem 31 year-ends ember At the close of December 31, 2016, the two companies consummated their agreement whereby Goldhammer would purchase Martin's common stock for $40,000,000 in cash and a $10,000,000 note payable to the sellers of Martin. Goldhammer engaged an appraiser to determine the fair value of Martin's fixed assets and intangibles other than goodwill as of December 31, 2016. Martin's books reflect those values. Current Situation: During 2018, Goldhammer and Martin have continued to see a downturn in both new housing starts and the home renovation industry. During the audit planning meeting with Goldhammer's external auditors, the carrying value of Martin's intangibles was discussed. To address the Goldhammer's auditor's concerns regarding potential impairment, Goldhammer has engaged a valuation firm to assist it in determining, at December 31, 2018, the fair value of both Martin as a whole, and Martin's intangible assets. The valuation firm's report detailed out the following fair values as of December 31, 2018: Fair value of Martin Customer relationships Tradename Noncompete Agreement S30,000,000 $7,500,000 $3,000,000 $250,000