Question
On September 1, 2020, Peter Corporation acquired Darcy Enterprises for a cash payment of $ 850,000. At the time of purchase, Darcys statement of financial
On September 1, 2020, Peter Corporation acquired Darcy Enterprises for a cash payment of $ 850,000. At the time of purchase, Darcys statement of financial position showed assets of $ 890,000, liabilities of $ 450,000, and owners equity of $ 440,000. The fair value of Darcys assets is estimated to be $ 1,150,000. Assume that Peter is a public company and the goodwill was allocated entirely to one cash-generating unit (CGU). Two years later, the CGUs carrying amount is $ 3,450,000; its value in use is $ 3,380,000; the fair value less costs to sell is $ 2,980,000.
- Determine if goodwill is impaired, and calculate the goodwill impairment loss.
- Record the journal entry for the impairment, if necessary. If not necessary, state that no journal entry is necessary.
- Explain the concept of a cash generating unit.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started