Question

Goodwill Impairment Bruce Farms Equipment Company had goodwill valued at $80 million on its balance sheet...

Goodwill Impairment Bruce Farms Equipment Company had goodwill valued at $80 million on its balance sheet at year-end. A review of the goodwill by the company’s CFO indicated that the goodwill was impaired and was now only worth $45 million. Prepare a journal entry to record the goodwill impairment on the books of the company.

Financial Statement Placement Name the financial statement where each of the following will ap-

pear: (IS) Income Statement; (BS) Balance Sheet; (SCF) Statement of Cash Flows; (N) None.

a. Book value of equipment purchased five years ago

b. Market value of equipment purchased five years ago

c. Cash proceeds from the sale of land

d. Gain on the sale of buildings

e. Accumulated depreciation on equipment

f. Impairment loss on land

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Answer #1

Ans 1) : Impairment Loss = Carrying Amount - Recoverable Amount = $80million - $45million =

Debit Credit
Impairment Loss Account Dr. $35million
To Goodwill Account $35million


2) a. Book Value of Equipment purchased five years ago - Balance Sheet

b. Market value of equipment purchased five years ago - None

c. Cash proceeds from the sale of land - Statement of Cash Flows

d. Gain on the sale of buildings - Income Statement

e. Accumulated depreciation on equipment - Balance Sheet

f. Impairment loss on land - Income Statement

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