Question

Company Corp. has purchased another company. The following information pertains to the purchase of the company and dealing with any necessary intangible asset issues. Use an Excel spreadsheet to prepare journal entries and move amounts to the general ledger. 1) On 1/2, the company purchases another company for $320,000. The purchased company had $80,000 in cash and $200,000 in PP&E. The purchased company had no other assets or liabilities. This journal entry can be entered in the cash journal by summarizing the effect on cash of the purchase. 2) On 12/31, the company finds that the fair value of the purchased company is now $290,000. Prepare any necessary journal entry for goodwill impairment or revaluation.

Answer 1

Journal entries

Date	particular	Amount Dr.	Amount Cr.
1/2	Business purchase A/c Dr.	320000
	To purchase Consideration		320000
	(Being Business purchase)
	PPE(property, plant and equipment A/C	200000
	Cash A/C	80000
	Goodwill A/C	40000
	To Business Purchase		320000
	Being Assets records

Journal Entries on the dates 31/12

On this date company impairment the value with 30000 ( it means value of goodwill records only 10000 and remaining value written off.

Journal entries

Date	particular	Amount Dr.	Amount Cr.
31/12	Goodwill Impairment A/c Dr.	30000
	To Goodwill A/C		30000
	Being Value of Goodwill revalued.
31/12	Profit and loss A/C Dr.	30000
	To Goodwill Impairment A/c		30000
	Being Goodwill writtenoff because purchase business valued 290000.