On May 31, 2011, Armstrong Company paid P3,500,000 to acquire all of the common stock of Hall Corporation, which became a division of Armstrong. Hall reported the following balance sheet at the time of the acquisition:

Current assets P900,000 Current liabilities P600,000

Noncurrent assets 2,700,000 Long-term liabilities 500,000

Stockholders equity 2,500,000

Total liabilities and

Total assets P3,600,000 stockholders equity P3,600,000

It was determined at the date of the purchase that the fair value of the identifiable net assets of Hall was P2,800,000. At December 31, 2011, Hall reports the following balance sheet information:

Current assets P800,000

Noncurrent assets (including goodwill recognized in purchase) 2,400,000

Current liabilities (700,000)

Long-term liabilities (500,000)

Net assets P2,000,000

It is determined that the fair market value of the Hall division is P2,100,000. The recorded amount for Halls net assets (excluding goodwill) is the same as fair value, except for property, plant, and equipment, which has a fair value of P200,000 above the carrying value.

Required:

1. The amount of goodwill recognized, if any, on May 31, 2011. ___________

2. The impairment loss, if any, to be recorded on December 31, 2011. ___________

3. Assume that the fair value of the Hall division is P1,900,000 instead of P2,100,000. Prepare the journal entry to record the impairment loss, if any, on December 31, 2011.

Implied fair value of goodwill = Fair value of division less the carrying value of the division (adjusted for fair value changes), net of goodwill:

Fair value of Hall division P1,900,000

Carrying value of division P2,000,000

Increase in fair value of PP&E 200,000

Less goodwill (700,000)

(1,500,000)

Implied value of goodwill 400,000

Carrying amount of goodwill (500,000)

Loss on impairment ___________

Loss on Impairment ___________

Goodwill ___________