On May 31, 2026, Mexico Company paid $3,920,000 to acquire all of the common stock of Conchita Incorporated, which became a division of Mexico. Conchita reported the following balance sheet at the time of the acquisition.

Current assets $ 1,008,000

Noncurrent assets $ 3,024,000

Total assets $4,032,000

Current liabilities $672,000

Long-term liabilities $560,000

Stockholders equity $2,800,000

Total liabilities and stockholders equity $4,032,000

It was determined at the date of the purchase that the fair value of the identifiable net assets of Conchita was $3,472,000. At December 31, 2026, Conchita reports the following balance sheet information.

Current assets $896,000

Noncurrent assets (including goodwill recognized in purchase) $2,688,000

Current liabilities ($784,000)

Long-term liabilities ($560,000)

Net assets $2,240,000

It is determined that the fair value of the Conchita Division is $2,464,000.

Instructions:

(a) Compute the amount of goodwill recognized, if any, on May 31, 2026.______________

(b) Determine the impairment loss, if any, to be recorded on December 31, 2026.______________

(c) Assume that fair value of the Conchita Division is $2,184,000 instead of $2,464,000. Prepare the journal entry to record the impairment loss, if any, to be recorded on December 31, 2026.

Account titles and explanations. Debit Credit

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