Question

Aspro Division is considered to be an individual reporting unit of Tabor Company. Tabor acquired the...

Aspro Division is considered to be an individual reporting unit of Tabor Company. Tabor acquired the division by issuing 100,000 shares of its common stock with a market price of $8.00 each. Tabor management was able to identify assets with fair values of $818,000 and liabilities of $203,000 at the date of acquisition. At the end of the first year, the reporting unit had assets with a fair value of $956,000, and the fair value of the reporting entity was $936,000. Tabor’s accountants concluded it must recognize impairment of goodwill in the amount of $26,000 at the end of the first year.

  

Required:
a.

Determine the fair value of the reporting unit’s liabilities at the end of the first year.

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#MY_QUESTION_IS ''WHAT IS THE DIFFERENCE BETWEEN THESE 2 TERMS '' REPORTING UNIT HAS ASSET WITH FAIR VALUE AND FAIR VALUE OF THE REPORTING ENTITY'' in this line At the end of the first year, the reporting unit had assets with a fair value of $956,000, and the fair value of the reporting entity was $936,000.

why fair value of the entity 936,000 is used in stead of 956,000?

Plz describe me what is reason. Thank you.

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Homework Answers

Answer #1

Answer:

a.

Liabilities reported by the Aspro Division at year-end:

Fair value of reporting unit at year-end ( it taken fair value of the reporting entity was $936,000 because , the reporting unit had ASSETS with a fair value of $956,000 ONLY)

$936,000

Acquisition price of reporting unit
($8 x 100,000)

$800,000

Fair value of net assets at acquisition
($818,000 - $203,000)

(615,000)

Goodwill at acquisition

$185,000

Impairment in current year

  (26,000)

Goodwill at year-end

(159,000)

Fair value of net assets at year-end

$777,000
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