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 | $258,000 | $231,000 | $140,250 | |
| Trademark | 175,000 | |||
| Customer list | 156,750 | |||
| Unpatented technology | 235,000 | |||
| Licenses | 90,500 | |||
| Copyrights | 72,500 | |||
| Goodwill | 133,700 | 157,250 | 99,500 | |
| Liabilities | (38,750) | |||
The total fair values for each reporting unit (including goodwill) are $672,500 for RU-1, $662,300 for RU-2, and $632,900 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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Managerial Accounting
Authors: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer
13th Edition
978-0697789938
