Barcode Corporation acquired 70% of the common stock of a Russian company on Jan

Question

Barcode Corporation acquired 70% of the common stock of a Russian company on January 1, 20X6. The goodwill associated with this acquisition was $12,520. Exchange rates at various dates during 20X6 follow:

Goodwill suffered an impairment of 25 percent during the year. If the functional currency is the Russian ruble, how much goodwill impairment loss should be reported on Barcode's consolidated statement of income for 20X6?

Multiple Choice

$3,080

$3,100

$3,130

$3,090

January 1, 20X6 1 ruble = $ 0.0313 December 31, 20X6 1 ruble = $ 0.0308 Average for 20X6 1 ruble = $ 0.031

Explanation / Answer

Solution : answer is $3,100

working:

Goodwill as on 1st Jan 20X6(in $) =$12,520

Goodwill as on 1st Jan 20X6(in Ruble) =

$12,520 ÷ 0.0313 = R 400,000

Impairment loss = 400,000 x 25% = R 400,000

Impairment loss in $ = 100,000 x 0.031 =$3,100

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