In 2010,Chesley Inc. acquired Corrigan Ltd. in a hostile takeover. However, the

Question

In 2010,Chesley Inc. acquired Corrigan Ltd. in a hostile takeover. However, the expected synergies never materialized. In 2013, Chesley decided to write-off $45 million of Goodwill on the financial statements to recognize that the Goodwill had become impaired. Which of the following items would be decreased by the impairment of Goodwill? (check all that apply)
a - Goodwill
b- Net Income
c - Accumulated Other Comprehensive Income
d - Cash from Operating Activities
e - Cash from Investing Activities

Explanation / Answer

The items would be decereased by impairment of Goodwill be: 1. Goodwill - Since, the goodwill is impaired or amortized, the goodwill will be reduced by the amount of goodwill, which is impaired. 2. Net Income - The net income will be reduced by the amount of goodwill that has been impaired by the Company. The Journal Entry to be Passed: Profit & Loss A/c                                Dr.    To Goodwill A/c

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