Question

Jenks Corporation acquired Linebrink Products on January 1, 2015 for $8,000,000, and recorded goodwill of $1,500,000 as a result of that purchase. At December 31, 2015, Linebrink Products had a fair value of $6,800,000. The net identifiable assets of the Linebrink (excluding goodwill) had a fair value of $5,800,000 at that time. What amount of loss on impairment of goodwill should Jenks record in 2015?

Answer 1

To calculate the firm's accounting profit, subtract the total expenses from the sales revenue. In this case, the accounting profit is $50,000.

Step-by-step explanation:

To calculate the firm's accounting profit, we need to subtract the total expenses from the sales revenue. In this case, the firm's expenses are the labor cost, capital cost, and material cost. The accounting profit can be calculated as follows:

Accounting profit = Sales revenue - Labor cost - Capital cost - Material cost

Substituting the given values: $1,000,000 - $600,000 - $150,000 - $200,000 = $50,000