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On January $1,$ Palisades, Inc., acquired $100$ percent of Sherwood Company$$s common stock for a fair value of $$120,280,000$ in cash and stock. The carrying amounts of Sherwood$$s assets and liabilities equaled their fair values except for its equipment, which was undervalued by $$528,000$ and had a $10-$year remaining life.

Palisades specializes in media distribution and viewed its acquisition of Sherwood as a strategic move into content ownership and creation. Palisades expected both cost and revenue synergies from controlling Sherwood$$s artistic content $($a large library of classic movies$)$ and its sports programming specialty video operation. Accordingly, Palisades allocated all of Sherwood$$s assets and liabilities $($including all $$49,790,000$ of goodwill recognized in the acquisition$)$ to a newly formed operating segment appropriately designated as a reporting unit.

However, Sherwood$$s assets have taken longer than anticipated to produce the expected synergies with Palisades$$s operations. Accordingly, Palisades reviewed events and circumstances and concluded that Sherwood$$s fair value was likely less than its carrying amount. At year$-$end, Palisades assessed the Sherwood reporting unit$$s fair value to $$110,280,000.$

At December $31,$ Palisades and Sherwood submitted the following balances for consolidation. There were no intra$-$entity payables on that date. Also, Palisades had not yet recorded any goodwill impairment.

Palisades, Inc. Sherwood Co$.$

Revenues $ $(18,570,000)$ $ $(12,280,000)$

Operating expenses $10,350,00012,080,000$

Equity in Sherwood's earnings $(147,200)$

Dividends declared $370,000108,000$

Retained earnings, $1/1(52,420,000)(2,322,000)$

Cash $357,000123,000$

Receivables $($net$)238,000911,000$

Investment in Sherwood $120,319,200$

Broadcast licenses $420,00014,042,000$

Movie library $435,00045,280,000$

Equipment $($net$)131,140,00017,640,000$

Current liabilities $(199,000)(720,000)$

Long$-$term debt $(21,985,000)(7,390,000)$

Common stock $(170,140,000)(67,640,000)$

What is the relevant test to determine whether goodwill is impaired?

How did Palisades determine Sherwood's December $31$ carrying amount of $$120,319,200?$

At what amount should Palisades record an impairment loss for its Sherwood reporting unit for the year?

What is consolidated net income for the year?

What is the December $31$ consolidated balance for goodwill?

Prepare a consolidated worksheet for Palisades and Sherwood $($Palisades$$s trial balance should first be adjusted for any appropriate impairment loss$).$

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