In 2012, Dooling Corporations acquired Oxford Inc. for $250 million, of which $5

Question

In 2012, Dooling Corporations acquired Oxford Inc. for $250 million, of which $50 million was attributed to goodwill. At the end of 2013, Dooling's accountants derive the following information for a required goodwill impairment test: Book value of Oxford ( including goodwill): $234.5 million Fair value of Oxfords tangible and intangible assets excluding goodwill: $204.9milliom Fair value of Oxford ( the reporting until): $225.0 million Using the facts above: Required: Determine the amount, if any, of the goodwill impairment loss that Dooling must recognize on these assets. In 2012, Dooling Corporations acquired Oxford Inc. for $250 million, of which $50 million was attributed to goodwill. At the end of 2013, Dooling's accountants derive the following information for a required goodwill impairment test: Book value of Oxford ( including goodwill): $234.5 million Fair value of Oxfords tangible and intangible assets excluding goodwill: $204.9milliom Fair value of Oxford ( the reporting until): $225.0 million Using the facts above: Required: Determine the amount, if any, of the goodwill impairment loss that Dooling must recognize on these assets. Book value of Oxford ( including goodwill): $234.5 million Fair value of Oxfords tangible and intangible assets excluding goodwill: $204.9milliom Fair value of Oxford ( the reporting until): $225.0 million Using the facts above: Required: Determine the amount, if any, of the goodwill impairment loss that Dooling must recognize on these assets.

Explanation / Answer

Dooling's accountants derive the following information for a required goodwill impairment test:

Fair value of Oxfords tangible and intangible assets excluding goodwill: $204.9milliom

Dooling Corporations acquired Oxford Inc. for $250 million, of which $50 million was attributed to goodwill.

So, as per present Fair value of Oxfords Assets(excluding goodwill) is $204.9 million and With goodwill , the total Oxfords Assets value will be $204.9 million + $50 million = $254.90 million. This means that the goodwill is over-valued by $4.90 million.

So, Dooling Corporations must adjust the goodwill by $4.90 million to reduce the goodwill to its fair book value. The goodwill impairment loss it must recognize on these assets is $4.90 million.

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