Question

The fair value of net identifiable assets of a reporting unit of Y Company is $270,000. The carrying value of the reporting unit's net assets on Y Company's books is $320,000, including $50,000 of goodwill before any impairment. If the reported goodwill impairment for the unit is $10,000, what would be the fair value of the entire reporting unit?

A) $320,000
B) $310,000
C) $270,000
D) $290,000

Answer 1

The fair value of the entire reporting unit cannot be directly calculated with the information provided, as the fair value of goodwill after impairment is required but not given. However, we can state that the carrying value of the reporting unit's net assets, adjusted for the impairment loss, is $310,000.

Step-by-step explanation:

To calculate the fair value of the entire reporting unit after recognizing the impairment loss, we must first adjust the carrying value of the reporting unit's net assets by subtracting the impairment loss. The carrying value of the reporting unit's net assets is given as $320,000, which includes $50,000 of goodwill. An impairment loss of $10,000 is reported, so the adjusted carrying value is $320,000 - $10,000 = $310,000. However, the fair value of the net identifiable assets is $270,000. Goodwill is the excess of the purchase price over the fair value of the net identifiable assets. In this case, since goodwill has been impaired, we cannot calculate the fair value of the entire reporting unit directly from the information given as it would require the fair value of goodwill after impairment which isn't provided.