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On January 1, 20X1, Porta Corporation purchased Swick Company’s net assets and assigned goodwill of $80,900...

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Accounting

On January 1, 20X1, Porta Corporation purchased Swick Company’snet assets and assigned goodwill of $80,900 to Reporting DivisionK. The following assets and liabilities are assigned to ReportingDivision K on the acquisition date:

Carrying AmountFair Value
Cash$14,900$14,900
Inventory56,90071,900
Equipment179,000199,000
Goodwill80,900
Accounts Payable30,90030,900


Required:
On December 31, 20X3, Porta must test goodwill for impairment.Determine the amount of goodwill to be reported for Division K andthe amount of goodwill impairment to be recognized, if any, ifDivision K’s fair value is determined to be

  1. $349,000.
  2. $289,000.
  3. $269,000.
Amount of GoodwillGoodwill Impairment
a.
b.
c.

Answer & Explanation Solved by verified expert
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Part a
Total Carrying Amount $300,800
Total Fair Value $254,900
Division K Fair Value $349,000
Goodwill will be reported $ 80,900
(Since Fair value of K $349,000 is more than Carrying amount of $300,800)
Impairment $           -  
(Since Fair value of K $349,000 is more than Carrying amount of $300,800)
Part b
Total Carrying Amount A $300,800
Total Fair Value B $254,900
Division K Fair Value C $289,000
Goodwill will be reported C-B $ 34,100
Impairment $80,900-$34,100 $ 46,800
Part c
Total Carrying Amount A $300,800
Total Fair Value B $254,900
Division K Fair Value C $269,000
Goodwill will be reported C-B $ 14,100
Impairment $80,900-$14,100 $ 66,800

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