Assume that the Equity Investment account relating to a subsidiary has a reporte
ID: 2422906 • Letter: A
Question
Assume that the Equity Investment account relating to a subsidiary has a reported balance of $5 million, including $500,000 of Goodwill. You currently value that subsidiary at $4.5 million, and estimate that the fair value of the subsidiary's net assets is $4.3 million. Should you perform a test for potential impairment of Goodwill? If so, perform the impairment test (s) and conclude whether or not Goodwill is impaired? (If Goodwill is not impaired, select N/A as your answer.) Prepare the required journal entry if you find the Goodwill asset to be impaired. (If Goodwill is not impaired, select N/A as your journal entry answers.)Explanation / Answer
a) should you perform a test for potential impairment of goodwill
YES
b) if so, perform the impairment test(s) and conclude whether or not goodwill is impaired ?
YES
c)
Description
Debit
Credit
Goodwill
200000
Equity investment
200000
Description
Debit
Credit
Goodwill
200000
Equity investment
200000