Question

In 2020, Red Inc. had acquired Green Co. and recorded goodwill of $285 million as a result. The net assets (including goodwill) from Red's acquisition of Green Co. had a 2021 year-end book value of $620 million. Red assessed the fair value of the Green reporting unit at this date to be $740 million, while the fair value of all of Green's identifiable tangible and intangible assets (excluding goodwill) was $589 million. The amount of the impairment loss that Red would record for goodwill at the end of 2021 is:_____.a. $151 million. b. $120 million. c. $0. d. $134 million.

Answer 1

Answer: c. $0

Step-by-step explanation:

An impairment loss is only recognize in cases where the Fair value of the assets of the acquired company is less than the book value.

When the book value of the assets is less than the fair value as is the case here, there is no impairment loss recognized so the impairment cost here will be $0.