Question 1

On May 31, 2022, Armstrong Company paid $3,600,000 to acquire all of the common stock of Hall Corporation, which became a division of Armstrong. Hall reported the following balance sheet at the time of the acquisition:

Current assets $ 900,000 Current liabilities $ 600,000 Noncurrent assets 2,700,000 Long-term liabilities 500,000 Stockholders' equity 2,500,000 Total liabilities and Total assets $3,600,000 stockholders' equity $3,600,000

It was determined at the date of the purchase that the fair value of the identifiable net assets of Hall was $3,100,000. At December 31, 2022, Hall reports the following balance sheet information:

Current assets $ 800,000 Noncurrent assets (incl. goodwill recognized in purchase) 2,400,000 Current liabilities (700,000) Long-term liabilities (500,000) Net assets $2,000,000

(a). Compute the amount of goodwill recognized, if any, on May 31, 2022.

(b). It is determined that the fair value of the Hall division is $2,200,000. Determine the impairment loss, if any, and prepare the journal entry on December 31, 2022.

(c). Assume that the fair value of the Hall division is $1,980,000 instead of $2,200,000. Determine the impairment loss, if any, and prepare the journal entry on December 31, 2022.