WebHelper Inc. acquired 100% of the outstanding stock of Silicon Chips Corporati

Question

WebHelper Inc. acquired 100% of the outstanding stock of Silicon Chips Corporation (SCC) for $47.0 million, of which $19.0 million was allocated to goodwill. At the end of the current fiscal year, an impairment test revealed the following: fair value of SCC, $44.0 million; fair value of SCC’s net assets (excluding goodwill), $33.0 million; book value of SCC’s net assets (including goodwill), $48.0 million. What amount of impairment loss should WebHelper recognize? (Enter your answer in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).)

Explanation / Answer

Acquired 100% of SCC outstanding stock 47 million Allocated to Goodwill of the $47 million 19 million Impairment Test FV of SCC 44 million FV of SCC net assets (excluding Goodwill) 33 million BV of SCC net assets (including Goodwill) 48 million Step - 1 BV of SCC net assets exceeds the FV of SCC. Impairment loss indicated Step -2 Determination of implied goodwill FV of SCC 44 million Less: FV of SCC net assets (excluding Goodwill) 33 million The implied value of goodwill 11 million Measurement of impairment loss: BV of goodwill 19 million Less: Implied value of Goodwill 11 million Impairment Loss 8 million Accounts Titles and Explanation Debit Credit Loss on impairment of Goodwill 8 million Goodwill 8 million

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