Exercise 148 On July 1, 2017, Vinson Corporation acquired Carley Company for $90

Question

Exercise 148 On July 1, 2017, Vinson Corporation acquired Carley Company for $900,000 cash. At the time of purchase, Carley's balance sheet showed assets of $775,000 and liabilities of $250,000. The fair value of Carley's assets is estimated to be $950,000 Your answer is incorrect. Try again. Compute the amount of goodwill acquired by Vinson. Amount of goodwill 2,000,000 Your answer is partially correct. Try again. On December 31, the fair value of Carley is estimated to be $720,000 and the implied fair value of goodwill is $170,000. The carrying value of Carley's net assets, including the goodwill, at year-end is $750,000. Prepare Vinson's journal entry, if necessary, to record impairment of goodwill. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit oss on Impairment 750,000 oodwill 750,000

Explanation / Answer

(a) Purchase price $900,000
Fair value of assets $950,000
Fair value of liabilities $250,000
Fair value of net assets $700,000
Value assigned to goodwill $200,000

(b)

The fair value of the reporting unit ($720,000) is less than the carrying value ($750,000)—an impairment has occurred. The loss is the difference between the recorded goodwill and the implied goodwill.

Account Titles and Explanation Debit Credit Loss on Impairment ($200,000 $170,000) $30,000 Goodwill $30,000

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