In 2018, Parent Corp. acquired Sub, Inc. and recorded goodwill of $110 million. Parent considers Sub a separate reporting unit. By the end of 2021, the net assets (including goodwill) of Sub are $330 million and its estimated fair value is $279 million. The amount of the impairment loss that Parent would record for goodwill at the end of 2021 is:
Multiple Choice
$0.
$51 million.
$169 million.
$59 million.
Answer - $ 169 millions.is the amount of impairment loss that parent would record for goodwill at the end of the 2021.
An impairment is recognised as a loss on the income statement and as a reduction in the Goodwill account . the amount that should be recorded as a loss is the difference between the current fair market value of the Asset and its carrying value or amount (i.e.the amount equal to the assets recorded cost ). An impairment loss reduce the recorded goodwill and Irreversible.
Impaired loss = current fair market value - carrying value of the assets.
Impaired loss = $ 279 - $ 330 = - $ 59.
The amount of the impaired loss that parent record for goodwill at the end of the 2021 = goodwill value recorded - imapired loss
= $ 110 - (- $ 59)
= $ 110 + $ 59
= $ 169.
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