In 2014, Quasar Ltd. acquired all of the common stock of Penlight Laser for $125

Question

In 2014, Quasar Ltd. acquired all of the common stock of Penlight Laser for $125.80 million. The fair value of Penlight's identifiable tangible and intangible assets totaled $207.70 million, and the fair value of liabilities assumed by Quasar was $96.80 million. Quasar performed a required goodwill impairment test at the end of its fiscal year ended December 31, 2016. Management has provided the following information: Fair value of Penlight Fair value of Penlight's net assets (excluding goodwill 107.90 million Book value of Penlight's net assets (including goodwill) 125.90 million $117.70 million Required: 1. Determine the amount of goodwill that resulted from the Penlight acquisition. (Enter your answers in millions rounded to 2 decimal places (e, 5,500,000 should be entered as 5.50).) 14.90 million 2. Determine the amount of goodwill impairment loss that Quasar should recognize at the end of 2016, i any. (Enter your answers in millions rounded to 2 decimal places (e, 5,500,000 should be entered as 5.50).) 8.20 milion 3. If an impairment loss is required, prepare the journal entry to record the loss. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions rounded to 2 decimal places (i.e, 5,500,000 should be entered as 5.50-) View transaction list View journal entry worksheet No Transaction General Journal Debit Loss on impairment of goodwll 0 F1 F2 F3 FS F7

Explanation / Answer

Answer 1. Calculation of Goodwill: Consideration Exchanged      125.80 Fair Value of Net Assets: Assets      207.70 Liabilities         96.80      110.90 Goodwill         14.90 Answer 2. Book Value of Net Assets ($125.90 million) > Fair Value ($117.70 Million) Indicates Impairement loss Implied Value of Goodwill: Fair Value of Penlight Inc      117.70 Fair Value of Penlight's Net Assets      107.90 Implied Value of Goodwill           9.80 Measurement of Impairment Loss: Book Value of Goodwill         14.90 Implied Value of Goodwill           9.80 Impairment Loss           5.10 Answer 3 Journal Entry Date Particulars Dr. Amt Cr. Amt 1 Loss on Impairment of Goodwill             Dr.           5.10    To Goodwill           5.10

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