On May 28, 2016, Pesky Corporation acquired all of the outstanding common stock

Question

On May 28, 2016, Pesky Corporation acquired all of the outstanding common stock of Harman, Inc., for $510 million. The fair value of Harman's identifiable tangible and intangible assets totaled $575 million, and the fair value of liabilities assumed by Pesky was $149 million.

     Pesky performed a goodwill impairment test at the end of its fiscal year ended December 31, 2016. Management has provided the following information:

Determine the amount of goodwill that resulted from the Harman acquisition. (Enter your answer in millions (i.e., 10,000,000 should be entered as 10).)

Determine the amount of goodwill impairment loss that Pesky should recognize at the end of 2016, if any. (Enter your answer in millions (i.e., 10,000,000 should be entered as 10).)

If an impairment loss is required, prepare the journal entry to record the loss. (If no entry is required for an event, select "No journal entry required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

On May 28, 2016, Pesky Corporation acquired all of the outstanding common stock of Harman, Inc., for $510 million. The fair value of Harman's identifiable tangible and intangible assets totaled $575 million, and the fair value of liabilities assumed by Pesky was $149 million.

     Pesky performed a goodwill impairment test at the end of its fiscal year ended December 31, 2016. Management has provided the following information:

Explanation / Answer

1. Calculation of Goodwill

Puchase value of stock =   $ 510 Million

Worth of harman Inc =        $ 426 Million

($ 575 -$ 149)

Goodwill =         $ 510- $ 426 = $ 84 Million

2) Goodwill Impairment Loss =

Net Valuation = $ 490 million

Goodwill impairment loss = $ 510 - $ 490 = $ 20 million

3) Goodwill impairment entry :-

Impairment loss A/c Dr - $ 20 million

To Goodwill                                              $ 20 million

Goodwill in the books as on 31-12-16

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