Question
On July 31, 2017, Wildhorse Company paid $2,850,000 to acquire all of the common stock of Conchita Incorporated, which became a division of Wildhorse. Conchita
On July 31, 2017, Wildhorse Company paid $2,850,000 to acquire all of the common stock of Conchita Incorporated, which became a division of Wildhorse. Conchita reported the following balance sheet at the time of the acquisition.
Current assets | $750,000 | Current liabilities | $600,000 | |||
Noncurrent assets | 2,550,000 | Long-term liabilities | 500,000 | |||
Total assets | $3,300,000 | Stockholders equity | 2,200,000 | |||
Total liabilities and stockholders equity | $3,300,000 |
It was determined at the date of the purchase that the fair value of the identifiable net assets of Conchita was $2,640,000. Over the next 6 months of operations, the newly purchased division experienced operating losses. In addition, it now appears that it will generate substantial losses for the foreseeable future. At December 31, 2017, Conchita reports the following balance sheet information.
Current assets | $480,000 | ||
Noncurrent assets (including goodwill recognized in purchase) | 2,540,000 | ||
Current liabilities | (700,000 | ) | |
Long-term liabilities | (500,000 | ) | |
Net assets | $1,820,000 |
It is determined that the fair value of the Conchita Division is $1,850,000. The recorded amount for Conchitas net assets (excluding goodwill) is the same as fair value, except for property, plant, and equipment, which has a fair value $130,000 above the carrying value.
a. Compute the amount of goodwill recognized, if any, on July 31, 2017.
The amount of goodwill $210,000
b. Determine the impairment loss, if any, to be recorded on December 31, 2017. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
The impartment loss : no entry
c. Assume that fair value of the Conchita Division is $1,796,000 instead of $1,850,000. Determine the impairment loss, if any, to be recorded on December 31, 2017. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) The impairment loss:
need answer of C.
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