Question
On July 1, 2014, Hair Snips Corp. purchases 100% of Cut-and-Dry Company for $2.75 million. At the time of acquisition, the fair market value of
On July 1, 2014, Hair Snips Corp. purchases 100% of Cut-and-Dry Company for $2.75 million. At the time of acquisition, the fair market value of Cut-and-Dry's tangible net assets (excluding goodwill) is $2.30 million. Hair Snips ascribes the excess of $450,000 to goodwill. During the first half of the year, the fair value of Cut-and-Dry declines to $2.45 million and the fair value of Cut-and-Dry's tangible net assets is estimated at $2.15 million as of December 31, 2014. This decline is deemed permanent.
What impairment charge, if any, should Hair Snips report at December 31, 2014?
a) $150,000
b) $300,000
c) $75,000
d) $0
e) None of the above
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