Problem 1

On March 31 2018 sanders corps purchased Arizonas inc for $75 million. On the date of purchase Arizonas assets had a book value of $86million and a fair value of $108million, Arizonas liabilities had a book value and fair market value of $68 million

1. What is the amount of goodwill that sanders should record because of acquisition of Arizonas

Problem 2

TESTING WHETHER PATENT IS IMPAIRED

As part of the acquisition of Arizona, sanders acquired a patent with a remaining life of 8 years, sanders recorded the patent on March 31, 2018 at a value of $5,000,000. On dec 31,2018 sanders management decided that both the goodwill and the patent for Arizona should be tested for impairment

The following information was available dec 31, 2018 related to the patent

Sum of future cash flows discounted to present value #3,500,000

Sum of future cash flows not discounted to present value (undiscounted) $4,200,000

Fair market value of patent $3,900,000

2a) show the full impairment test that sanders will perform at dec 31, 2018 to determine the amount of impairment loss to record related to its patent (if any)

2b) at what amount would sanders report the patent on its dec 31^st balance sheet after performing the impairment test

TESTING WHETHER GOODWILL IS IMPAIRED

Sanders used the following information to test whether goodwill associated with Arizonas is impaired as of dec 31 2018

Book value of Arizonas net asset $73,000,000 fair market value of Arizonas business unit $67,000,000

3a) determine the amount of goodwill impairment loss (if any) that sanders should recognize as at dec 31 2018

3b) at what value would sanders report goodwill associated with Arizonas within its dec 31 2018 balances sheet after performing the impairment test