Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

On May 31, 2004, Porter Company paid $2,100,000 to acquire all of the common stock of Dryer Corporation, which became a division of Porter. Dryer

On May 31, 2004, Porter Company paid $2,100,000 to acquire all of the common stock of Dryer Corporation, which became a division of Porter. Dryer reported the following balance sheet at the time of the acquisition: Current assets $ 500,000 Noncurrent assets 1,800,000 Total assets $2,300,000 Current liabilities $ 400,000 Long-term liabilities 300,000 Stockholders equity 1,600,000 Total liabilities and stockholders equity $2,300,000 It was determined at the date of the purchase that the fair value of the identifiable net assets of Dryer was $1,800,000. At December 31, 2004, Dryer reports the following balance sheet information: Current assets $ 400,000 Noncurrent assets (including goodwill recognized in purchase) 1,600,000 Current liabilities (500,000) Long-term liabilities (300,000) Net assets $1,200,000 It is determined that the fair market value of the Dryer division is $1,250,000. The recorded amount for Dryers net assets (excluding goodwill) is the same as fair value, except for property, plant, and equipment, which has a fair value of $150,000 above the carrying value. Instructions (a) Compute the amount of goodwill recognized, if any, on May 31, 2004. (b) Determine the impairment loss, if any, to be recorded on December 31, 2004. (c) Assume that the fair value of the Dryer division is $1,100,000 instead of $1,250,000. Prepare the journal entry to record the impairment loss, if any, on December 31, 2004

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Managerial Accounting Creating Value in a Dynamic Business Environment

Authors: Ronald Hilton, David Platt

12th edition

1259969517, 1260566390, 978-1260417043

More Books

Students also viewed these Accounting questions