Question
Ross Company pays $1,595,000 to acquire 100% of the common stock of Tyrone Incorporated. It assumes that Tyrone's plant assets (such as the factory building
Ross Company pays $1,595,000 to acquire 100% of the common stock of Tyrone Incorporated. It assumes that Tyrone's plant assets (such as the factory building and land) are undervalued by $49,000. The historical cost of the net assets acquired, excluding goodwill, is equal to $1,505,000. Tyrone will be held as a division of Ross.
The following information is available 1 year after the acquisition of the subsidiary company (i.e., the reporting unit):
Ross estimated the fair (appraisal) value of the division's net assets (excluding goodwill) 1 year after the date of acquisition at $1,608,000.
Requirement a. Compute goodwill recorded on the date of acquisition.
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Goodwill |
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Requirement b. Determine whether goodwill is impaired assuming that the fair value of the Tyrone Division with goodwill 1 year after acquisition is equal to $2,002,000. Provide the impairment journal entry, if needed.
One-Step Impairment Test |
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Impairment indicated |
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Prepare the journal entry required to record any impairment loss. (Record debits first, then credits. Exclude explanations from any journal entries. If no entry is required select "No Entry Required" on the first line of the journal entry table and leave all remaining cells in the table blank.)
Account | Date of Impairment | |
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Requirement c. Determine whether goodwill is impaired assuming that the fair value of the Tyrone Division with goodwill 1 year after acquisition is equal to $1,612,000. Prepare the impairment journal entry, if needed.
One-Step Impairment Test |
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Impairment indicated |
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Prepare the journal entry required to record any impairment loss. (Record debits first, then credits. Exclude explanations from any journal entries. If no entry is required select "No Entry Required" on the first line of the journal entry table and leave all remaining cells in the table blank.)
Account | Date of Impairment | |
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