Question

On May 31, 2021, Crane Company paid $3,955,000 to acquire all of the common stock of Cullumber Corporation, which became a division of Crane. Cullumber reported the following balance sheet at the time of the acquisition:

Current assets $ 1,017,000
Current liabilities $ 678,000
Noncurrent assets 3,051,000
Long-term liabilities 565,000
Stockholder's equity 2,825,000
Total assets $4,068,000
Total liabilities and stockholder's equity $4,068,000
It was determined at the date of the purchase that the fair value of the identifiable net assets of Cullumber was $3,503,000. At December 31, 2021, Cullumber reports the following balance sheet information:
Current assets $ 904,000
Noncurrent assets (including goodwill recognized in purchase) 2,712,000
Current liabilities (791,000 )
Long-term liabilities (565,000 )
Net assets $2,260,000
It is determined that the fair value of the Cullumber division is $2,486,000.
Required:
1. Compute the amount of goodwill recognized, if any, on May 31, 2021. (If answer is zero, do not leave answer field blank. Enter 0 for the amount.)
2. Determine the impairment loss, if any, to be recorded on December 31, 2021.

Answer 1

1. $452,000

2. zero

Step-by-step explanation:

1. The computation of the goodwill is shown below:

= Acquiring value of the division - fair value of the identifiable net assets

= $3,955,000 - $3,503,000

= $452,000

2. Since the fair value of the Cullumber division i.e $2,486,000 is more than the net asset value i.e $2,260,000 or the carrying value. So no impairment loss is recorded

All other information which is given is not relevant. Hence, ignored it