Question

In 2019, Alliant Corporation acquired Centerpoint Inc. for $352 million, of which $62 million was allocated to goodwill. At the end of 2021, management has provided the following information for a required goodwill impairment test Fair value of Centerpoint Inc Book value of Centerpoint's net assets (excluding goodwill) Book value of Centerpoint's net assets $256 million 228 million (including goodwill) 290 million Required: 1. Determine the amount of the impairment loss. (Negative amount should be indicated by a minus sign. Enter your answer in millions (i.e., 10,000,000 should be entered as 10)). 2. Determine the amount of the impairment loss assuming that the fair value of Centerpoint is $318 million. (Enter your answer in millions (i.e., 10,000,000 should be entered as 10)) million million 1 Impairment loss 2 Impairment loss

Answer 1

1. $34 million

2. $0

Step-by-step explanation:

Given that,

Fair value of Centerpoint Inc = $256 million

Book value of Centerpoint's net assets (excluding goodwill) = $228 million

Book value of Centerpoint's net assets (including goodwill) = 290 million

1. Actual Value of Goodwill:

= Fair Value of Centrepoint Inc. - Book Value of Net assets (excluding goodwill)

= $256 million - 228 million

= $28 million

Loss on Impairment of Goodwill:

= Goodwill recorded - Actual value of goodwill

= $62 million - $28 million

= $34 million

2. In this case Fair value of ($318 million) is more than Book value ($290 million) then there will be no Impairment Loss.

It means that the loss on Impairment of Goodwill = $0.