Question
Purchase Company recently acquired several businesses and recognized goodwill in each acquisition. Purchase has allocated the resulting goodwill to its three reporting units: RU-1, RU-2,
Purchase Company recently acquired several businesses and recognized goodwill in each acquisition. Purchase has allocated the resulting goodwill to its three reporting units: RU-1, RU-2, and RU-3. Purchase opts to skip the qualitative assessment and therefore performs a quantitative goodwill impairment review annually.
In its current-year assessment of goodwill, Purchase provides the following individual asset and liability carrying amounts for each of its reporting units:
| Carrying Amounts | ||||
| RU-1 | RU-2 | RU-3 | ||
| Tangible assets | $190,000 | $284,000 | $160,500 | |
| Trademark | 238,000 | |||
| Customer list | 126,000 | |||
| Unpatented technology | 205,000 | |||
| Licenses | 115,000 | |||
| Copyrights | 71,750 | |||
| Goodwill | 135,550 | 213,650 | 138,500 | |
| Liabilities | (33,500) | |||
The total fair values for each reporting unit (including goodwill) are $631,550 for RU-1, $791,700 for RU-2, and $704,500 for RU-3. To date, Purchase has reported no goodwill impairments.
How much goodwill impairment should Purchase report this year for each of its reporting units?
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Forensic And Investigative Accounting
Authors: G. Stevenson Smith D. Larry Crumbley, Edmund D. Fenton
10th Edition
0808056301, 9780808056300
