On July 31, 20X0, Thomas, Incorporated had the following balance sheet. On that date, Hobbes Company acquired all of th common stock of Thomas, which became a division (a reporting unit) of Hobbes. Current Assets Noncurrent Assets Total Assets $ Current Assets Noncurrent Assets Total Assets THOMAS, INCORPORATED BALANCE SHEET AT JULY 31, 20X0 800,000 2,700,000 The details concerning the purchase of Thomas by Hobbes is provided below. 3,500,000 $ Price Paid by Hobbes For Thomas, Incorporated (all in cash) Fair Market Value of Identifiable Net Assets of Thomas, Incorporated on Purchase Date $ HOBBES COMPANY BASIC DETAILS CONCERNING PURCHASE OF THOMAS, INCORPORATED AT JULY 31, 20X0 Current Liabilities Long Term Liabilities Stockholders' Equity Total Liabilities and Stockholders' Equity $ 450,000 2,400,000 Over the next 6 months of operations, the newly purchased division experienced operating losses. In addition, it now appea that it will generate substantial losses for the foreseeable future. At December 31, 20X0, Thomas reports the following balance sheet information, including information about fair market value of the net assets at that time and any required adjustments to those amounts. THOMAS DIVISION BALANCE SHEET AT DECEMBER 31, 20X0 Current Liabilities 2,850,000 $ $ Long Term Liabilities Stockholders' Equity Total Liabilities and Stockholders' Equity S Fair Market Value of Thomas Division Net Assets at December 31 2010 ( 600,000 500,000 2,400,000 3,500,000 3,000,000 2,750,000 700,000 500,000 1,650,000 2,850,000

On July 31,20X0, Thomas, Incorporated had the following balance sheet. On that date, Hobbes Company acquired all of th common stock of Thomas, which became a division (a reporting unit) of Hobbes. The details concerning the purchase of Thomas by Hobbes is provided below. Over the next 6 months of operations, the newly purchased division experienced operating losses In addition, it now apped that it will generate substantial losses for the foreseeable future. At December 31, 20X0. Thomas reports the following balance sheet information, including information about fair market value of the net assets at that time and any required adpustmonts to those amounts. the next 6 months of operations, the newly purchased division experienced operating losses. In addition, it now appe it will generate substantial losses for the foreseeable future. At December 31, 20X0. Thomas reports the following ance sheet information, including information about fair market value of the net assets at that time and any required ustments to those amounts. EQUIRED: (1) Calculate the amount of goodwill that Hobbes should record, if any, from the purchase of Thomas on July 31,200. Show the amounts that should be used for the calculation and the appropriate formulas for making the calculation. (2) Calculate the impairment loss on goodwill, if any, that Hobbes should record at December 31, 20X0 base on the information pronded in the problem. Show the amounts that should be used for the calculation ar the appropriate formulas for making the calculation. (3) Assume that the fair market value of the Thomas Dision is $1,600,000 rather than the $1,850,000 given the onginal irformation. Calculate the impairment loss on goodwill, if any, that Hobbes should record at December 31,200 based on this new information. Show the amounts that should be used for the calculation and the appropriate formulas for making the calculation. (4) Using the results from Pat (3). prepare the general joumal entry, in proper form, to record the impairmen loss, if any, and indicate where the toss would be reported in the income statement HOBBES COMPANY CALCULATION TO DETERMINE IMPAIRMENT LOSS ON GOODWILL AT DECEMBER 31,200 Item Amount Amount of Impairment Loss on Goodwill Is there an impairment loss? Explain below. HoEacs coMPANY