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    Impairment of Goodwill

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    Largest Company acquired Large Company on January 1. As part of the acquisition, $10,000 in goodwill was recognized;

    this goodwill was assigned to Largest's Production report unit. During the year, the Production reporting unit reported revenues of $13,000. Publicly traded companies with operations similar to those of the Production unit had price-to-revenue ratios averaging 1.60.

    The fair values and book values of the assets and liabilities of the Production reporting unit are as follows:

    Identifiable assets...............$21,300 book value $20,500 fair values

    Goodwill.....................$10,000 book value $?? fair value

    Liabilities.........................$7,600 $7,600 fair values

    Make the journal entry necessary to recognize any goodwill impairment loss.

    Please provide details.

    Thanks

    © BrainMass Inc. brainmass.com December 16, 2022, 4:21 am ad1c9bdddf
    https://brainmass.com/business/goodwill/impairment-goodwill-348688

    Solution Preview

    Goodwill impairment testing:
    Step 1. Compare the fair value of the reporting unit to its book value
    The fair value of the production reporting unit=reported revenue*Price-to-revenue ...

    Solution Summary

    The impairment of Goodwill is examined.

    $2.49

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