Problem 12-4 (Part Level Submission) On July 31, 2017, Blossom Company paid $2,9
ID: 2401385 • Letter: P
Question
Problem 12-4 (Part Level Submission) On July 31, 2017, Blossom Company paid $2,900,000 to acquire all of the common stock of Conchita Incorporated, which became a division of Blossom. Conchita reported the following balance sheet at the time of the acquisition. $530,000 430,000 2,390,000 $3,350,000 Current assets $750,000 nt liabilities Noncurrent assets 600,000 Long-term liabilities Total assets $3,350,000Stockholders' equity Total liabilities and stockholders' equity It was determined at the date of the purchase that the fair value of the identifiable net assets of Conchita was S2,590,000. Over the next 6 months of operations, the newly purchased division experienced operating losses. In addition, it now appears that it will generate substantial losses for the foreseeable future. At December 31, 2017, Conchita reports the following balance sheet information. Current assets Noncurrent assets (including goodwill recognized in purchase) Current liabilities Long-term liabilities $410,000 2,190,000 (640,000) (440,000) $1,520,000 Net assets It is determined that the fair value of the Conchita Division is $1,850,000. The recorded amount for Conchita's net assets (excluding goodwill) is the same as fair value, except for property, plant, and equipment which has a fair value $110,000 above the carrying value. Your answer is correct. Compute the amount of goadwill recognized, if any, on uly 31, 2017 The amount of goodwill 310000Explanation / Answer
Computation for impairment
Impaired goodwill= Fairvalue of the division less carrying value of division(adjusted for value changes, net of goodwill:
Particulars Amt(in $) Amt(in$) Fair value of Conchita division $1,380,000 Carrying value of division $1,520,000 Increase in fair value of PPE $110,000 Goodwill (310,000) (1320,000) Impaired fair value of goodwill 60,000 Carrying value of goodwill (310,000) Impairment loss 250,000