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 | $181,000 | $246,000 | $186,000 | |
Trademark | 197,000 | |||
Customer list | 138,000 | |||
Unpatented technology | 234,000 | |||
Licenses | 91,500 | |||
Copyrights | 73,500 | |||
Goodwill | 186,600 | 206,950 | 134,500 | |
Liabilities | (44,500) | |||
The total fair values for each reporting unit (including goodwill) are $632,700 for RU-1, $743,050 for RU-2, and $748,750 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?
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