Question

Pursuing an inorganic growth strategy, Wilson Company acquired Venus Company's net assets and assigned them to four separate reporting divisions. Wilson assigned total goodwill of $134,000 to the four reporting divisions as given below: Alpha Beta Gamma Delta Carrying value $200,000 $320,000 $370,000 $300,000 Goodwill included in carrying value 20,000 34,000 50,000 30,000 Fair value of net identifiable assets at year-end 150,000 300,000 390,000 280,000 Fair value of reporting unit at year-end 180,000 350,000 360,000 295,000 1) Based on the preceding information, for Delta: A) goodwill impairment of $15,000 should be recognized at year-end. B) goodwill of $30,000 should be reported at year-end. C) no goodwill should be reported at year-end. D) goodwill impairment of $20,000 should be recognized at year-end

Answer 1

	Alpha	Beta	Gamma	Delta
Carrying Value	200,000	320,000	370,000	300,000
Goodwill included in carrying value	20000	34,000	50,000	30,000
Fair value of net identifiable assets at year end	150,000	300,000	390,000	280,000
Fair value of reporting unit at year end	180,000	350,000	360,000	295,000

Total goodwill impairment = 134000

Based on the preceding information for Delta, goodwill impairment of $15,000 should be recognized at year-end.

Good will impairment is a charge that records when carrying value exceeds fair value. If the fair value exceeds its carrying value, the company will apply the net identifiable assets. Based on the preceding information for Delta, goodwill impairment of $15,000 should be recognized at year-end.