Question

On July 31, 2017, Wildhorse Company paid $2,850,000 to acquire all of the common stock of...

On July 31, 2017, Wildhorse Company paid $2,850,000 to acquire all of the common stock of Conchita Incorporated, which became a division of Wildhorse. Conchita reported the following balance sheet at the time of the acquisition.

Current assets

$750,000

 Current liabilities

$600,000
Noncurrent assets

2,550,000

 Long-term liabilities

500,000
   Total assets

$3,300,000

 Stockholders’ equity

2,200,000
   Total liabilities and stockholders’ equity

$3,300,000


It was determined at the date of the purchase that the fair value of the identifiable net assets of Conchita was $2,640,000. Over the next 6 months of operations, the newly purchased division experienced operating losses. In addition, it now appears that it will generate substantial losses for the foreseeable future. At December 31, 2017, Conchita reports the following balance sheet information.

Current assets

$480,000
Noncurrent assets (including goodwill recognized in purchase)

2,540,000
Current liabilities

(700,000

)
Long-term liabilities

(500,000

)
   Net assets

$1,820,000


It is determined that the fair value of the Conchita Division is $1,850,000. The recorded amount for Conchita’s net assets (excluding goodwill) is the same as fair value, except for property, plant, and equipment, which has a fair value $130,000 above the carrying value.

a. Compute the amount of goodwill recognized, if any, on July 31, 2017.

The amount of goodwill $210,000

b. Determine the impairment loss, if any, to be recorded on December 31, 2017. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

The impartment loss : no entry

c. Assume that fair value of the Conchita Division is $1,796,000 instead of $1,850,000. Determine the impairment loss, if any, to be recorded on December 31, 2017. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
The impairment loss:

need answer of C.

Business   Accounting   
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Answer #1
a) Goodwill=cost of the division - identifiable assets
Cost of division 2850000
Value of identifiable assets 2640000
Goodwill 210000
c) Fair value of the C division 1796000
carrying value of division 1820000
increase in fair value of property plant and Equipment 130000
Less: Goodwill as above 210000
1740000
Fair value of the Goodwill 56000
Carrying value of the goodwill 210000
Impairment loss due to change in fair value of the assets -154000
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