Question

On Dec 31, an entity had a reporting unit that had a book value of $3,450,000, including goodwill of $225,000. As part of its annual review of good will impairment, the entity determined that the fair value of the reporting unit was $3,310,000. The entity assigned $3,170,000 of the reporting units fair value to its assets and liabilities other than goodwill. What is the goodwill impairment loss to be reported on Dec 31 under current US GAAP

Answer 1

$85,000

Step-by-step explanation:

Calculation for the goodwill impairment loss to be reported on Dec 31 under current US GAAP

First step is to calculate the Goodwill implied fair value

Goodwill implied fair value=($3,310,000-$3,170,000)

Goodwill implied fair value=$140,000

Now let calculate the Impairment loss using this formula

Impairment loss = Goodwill implied fair value - Goodwill book value

Let plug in the formula

Impairment loss= $140,000 - $225,000

Impairment loss = $85,000

Therefore the goodwill impairment loss to be reported on Dec 31 under current US GAAP is $85,000