On January 1, 2013, Porsche Company acquired the net assets of Saab Company for $450,500 cash. The fair value of Saab’s identifiable net assets was $374,980 on this date. Porsche Company decided to measure goodwill impairment using the present value of future cash flows to estimate the fair value of the reporting unit (Saab). The information for these subsequent years is as follows: Year Present Value of Future Cash Flows Carrying Value of Saab’s Identifiable Net Assets* Fair Value Saab’s Identifiable Net Assets 2014 $400,620 $329,851 $339,983 2015 $399,230 $319,497 $345,596 2016 $350,150 $299,900 $325,360 * Identifiable net assets do not include goodwill. (a) For each year determine the amount of goodwill impairment, if any. 2014 2015 2016 Goodwill impairment $ $ $

On January 1, 2013, Porsche Company acquired the net assets of Saab Company for $450,500 cash. The fair value of Saab’s identifiable net assets was $374,980 on this date. Porsche Company decided to measure goodwill impairment using the present value of future cash flows to estimate the fair value of the reporting unit (Saab). The information for these subsequent years is as follows: Year Present Value of Future Cash Flows Carrying Value of Saab’s Identifiable Net Assets* Fair Value Saab’s Identifiable Net Assets 2014 $400,620 $329,851 $339,983 2015 $399,230 $319,497 $345,596 2016 $350,150 $299,900 $325,360 * Identifiable net assets do not include goodwill. (a) For each year determine the amount of goodwill impairment, if any. 2014 2015 2016 Goodwill impairment $ $ $

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter11: Long-term Assets

Section: Chapter Questions

Problem 11PB: On May 1, 2015, Zoe Inc. purchased Branta Corp. for $15,000,000 in cash. They only received...

See similar textbooks

(a)

For each year determine the amount of goodwill impairment, if any.

		2014		2015		2016
Goodwill impairment		$		$		$

Definition Definition Intangible asset that includes proprietary or intellectual property and brand value of a firm. Goodwill is recorded in the books when a firm purchases another firm and the purchase price is more than the fair value of net identifiable assets of the acquired business. The amount of goodwill is recorded on the asset side of the balance sheet (statement of financial position).

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

On January 1, 2010, P Company acquired the net assets of S Company for $1,580,000 cash. The fair value of S Co. identifiable net assets was $1,310,000 on this date. P Company decided to measure goodwill impairment using the present value of future cash flows to estimate the fair value of the reporting unit (S Co.). The information for these subsequent years is as follows: Carrying value of S Co. Identifiable Net Assets $1,160,000 $1,120,000 Fair Value SCo. Identifiable Net Assets $1,190,000 $1,210,000 Present value of Future Cash Flows $1,390,000 $1,400,000 * Identifiable net assets do not include goodwill. Year 2011 2012 Choose the correct answer: In year 2011 S Company had: * Excess of fair value over carrying value of $30,000 Excess of carrying value over fair value of $30,000 Excess of fair value over carrying value of $40,000 Excess of carrying value over fair value of $40,000 None of the options is correct
On January 1, 2010, P Company acquired the net assets of S Company for $1,580,000 cash. The fair value of S Co. identifiable net assets was $1,310,000 on this date. P Company decided to measure goodwill impairment using the present value of future cash flows to estimate the fair value of the reporting unit (S Co.). The information for these subsequent years is as follows: Carrying value of SCo. Identifiable Net Assets $1,160,000 $1,120,000 Fair Value S Co. Identifiable Net Assets $1,190,000 $1,210,000 Present value of Future Cash Flows $1,390,000 $1,400,000 Year 2011 2012 * Identifiable net assets do not include goodwil.
(Fair Value Estimate) Killroy Company owns a trade name that was purchased in an acquisition of McClellan Company. The trade name has a book value of $3,500,000, but according to GAAP, it is assessed for impairment on an annual basis. To perform this impairment test, Killroy must estimate the fair value of the trade name. (You will learn more about intangible asset impairments in Chapter 12.) It has developed the following cash flow estimates related to the trade name based on internal information. Each cash flow estimate reflects Killroy’s estimate of annual cash flows over the next 8 years. The trade name is assumed to have no salvage value after the 8 years. (Assume the cash flows occur atthe end of each year.) Cash Flow Estimate Probability Assessment $380,000 20% 630,000 50% 750,000 30% Instructions(a) What is the estimated fair value of the trade name? Killroy determines that the appropriate discount rate for this estimation is 8%.(b) Is the estimate developed for…
On December 31, 2022, Joshua Company had an equipment with cost of P9,000,000 and accumulated depreciation of P3,000,000. Due to obsolescence and physical damage, the equipment was found to be impaired. On the same date, the entity determined that the equipment had a fair value less disposal cost of P4,500,000, discounted net cash inflows of P4,000,000 and undiscounted net cash inflows of P5,000,000. What amount should be reported as impairment loss for 2022? A. 1,500,000 B. 2,000,000 C. 1,000,000 D. Zero
Breathless Company acquired equipment on January 1, 2018 for P5,000,000. The equipment had a 10-year useful life and no residual value. On December 31, 2019, the following information was obtained: Expected value of undiscounted cash flows Fair value estimated with in-use premise 3,600,000 3,700,000 Fair value estimated with in-exchange premise 3,500,000 6. What amount should be recognized as impairment loss for 2019? a. 300,000 b. 400,000 c. 500,000 d. Silver Company operates a production line which is treated as a cash generating unit for impairment review purposes. At year-end, the carrying amounts of the noncurrent assets are as follows: Goodwill 1,100,000 Machinery 2,200,000 The value in use of the production line is estimated at P2,700,000 at this time. 7. What is the revised carrying amount of goodwill after recognition of impairment? a. 1,100,000 b. 900,000 c. 800,000 d. 500,000 8. What is the revised carrying amount of machinery after recognition of impairment? a. 2,200,000 b.…
Blue Company owns a trade name that was purchased in an acquisition of McClellan Company. The trade name has a book value of $3,500,000, but according to GAAP, it is assessed for impairment on an annual basis. To perform this impairment test, Blue must estimate the fair value of the trade name. It has developed the following cash flow estimates related to the trade name based on internal information. Each cash flow estimate reflects Blue's estimate of annual cash flows over the next 9 years. The trade name is assumed to have no salvage value after the 9 years. (Assume the cash flows occur at the end of each year.) Cash Flow Estimate $382.500 646,400 769,700 Probability Assessment Click here to view factor tables. Estimated fair value 20% $ 50% (a) What is the estimated fair value of the trade name? Blue determines that the appropriate discount rate for this estimation is 9%. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to O decimal places, e.g. 458,581.) 30%
Muskoko Inc. purchased a property for $1.800,000 in 2022. The carrying value of property was $1,500,000 when it was required to be tested for impairment at December 31, 2026. The fair value at December 31, 2026 is $1,250,000 and the present value of future cash flows from the production facility was calculated as S1.056.000 at December 31, 2026. What is the total impairment of the production facility. if any? Answers A-E A impairment gain of $ 5S0.000 B Impairment loss of $ 250.000 No impairment gain or loss D Impairmenit gain of $300.000 E mpairment loss of $ 444,000
In 2015, Mennorah Corporation acquired production machinery at a cost of $490,000, which now has a book value of $190,000. The sum of undiscounted future cash flows from use of the machinery is $180,000. and it's fair value is $120,000. What amount should Mennorah recognize as a loss on impairment?
Carla Company owns a trade name that was purchased in an acquisition of McClellan Company. The trade name has a book value of $3,500,000, but according to GAAP, it is assessed for impairment on an annual basis. To perform this impairment test, Carla must estimate the fair value of the trade name. It has developed the following cash flow estimates related to the trade name based on internal information. Each cash flow estimate reflects Carla's estimate of annual cash flows over the next 9 years. The trade name is assumed to have no salvage value after the 9 years. (Assume the cash flows occur at the end of each year.) Cash Flow Estimate $381,100 649,200 759,600 Probability Assessment Click here to view factor tables 20% 50% 30% (a) What is the estimated fair value of the trade name? Carla determines that the appropriate discount rate for this estimation is 9%. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to O decimal places, e.g. 458,581.)
Gulf Company purchases Arab Company for $900,000 cash on January 2, 2019. The book value of Arab Company’s net assets, as reflected on its December 31, 2018 balance sheet is $720,000. An analysis by Gulf on December 31, 2018 indicates that the fair value of Arab's tangible assets exceed the book value by $60,000, and the fair value of indefinite intangible assets exceed book value by $55,000. How much goodwill should recognized by Gulf company when recording the purchase of Arab Company? a. $98,000. b. $130,000. c. $-0-. d. $65,000.
Kingbird Company owns a trade name that was purchased in an acquisition of McClellan Company. The trade name has a book value of $3,500,000, but according to GAAP, it is assessed for impairment on an annual basis. To perform this impairment test, Kingbird must estimate the fair value of the trade name. It has developed the following cash flow estimates related to the trade name based on internal information. Each cash flow estimate reflects Kingbird's estimate of annual cash flows over the next 10 years. The trade name is assumed to have no salvage value after the 10 years. (Assume the cash flows occur at the end of each year.) Cash Flow Estimate $374,100 631,400 759,600 Probability Assessment Click here to view factor tables. Estimated fair value 20% LA 50% (a) What is the estimated fair value of the trade name? Kingbird determines that the appropriate discount rate for this estimation is 10%. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places,…
Headland Company owns a trade name that was purchased in an acquisition of McClellan Company. The trade name has a book value of $3,500,000, but according to GAAP, it is assessed for impairment on an annual basis. To perform this impairment test, Headland must estimate the fair value of the trade name. It has developed the following cash flow estimates related to the trade name based on internal information. Each cash flow estimate reflects Headland's estimate of annual cash flows over the next 9 years. The trade name is assumed to have no salvage value after the 9 years. (Assume the cash flows occur at the end of each year.) Cash Flow Estimate $380,600 646,900 768,300 Probability Assessment Click here to view factor tables. Estimated fair value $ LA 20% (a) What is the estimated fair value of the trade name? Headland determines that the appropriate discount rate for this estimation is 9%. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g.…