please help me by explination as soon as posible Q9) On January 1, 2017, Hatlen

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please help me by explination as soon as posible

Q9)

On January 1, 2017, Hatlen Company purchases 100% of Wolf Company for $19.2 million. At the time of acquisition, the fair market value of Wolf's tangible net assets (excluding goodwill) is $17.6 million. Hatlen ascribes the excess of $1.6 million to goodwill. Assume that the market value of Wolf declines to $16.0 million and that the fair market value of Wolf's tangible net assets is estimated at $14.7 million as of December 31, 2017.

Determine if the goodwill has become impaired and, if so, the amount of the impairment.

Select one:

A. $2.9 million impairment

B. No impairment

C. $300,000 impairment

D. $1.3 million impairment

Q10)

Square Company purchases an equity investment in Tangle Company at a purchase price of $8 million, representing 40% of the book value of Tangle. During the current year, Tangle reports net income of $700,000 and pays cash dividends of $300,000. At the end of the year, the market value of Square's investment is $8.3 million.

What amount of income does Square report relating to this investment in Tangle for the year?

Select one:

A. $300,000

B. $120,000

C. $240,000

D. $280,000

Explanation / Answer

Q-9) Solution: $300,000 impairment

Working: Impute value of goodwill = $16.0 million - $14.7 million = $1.3 million

Because this is less than the carrying amount, thus goodwill be impaired by $1.6 million - $1.3 million = $0.3 million or $300,000

Q-10) Solution: $280,000

Working: Equity earnings = 700,000 * 40% = 280,000

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