Question

Kent Company acquired Devon Company on January 1, 2016 for $3,600,000 and recorded goodwill of $400,000 as a result of that purchase. At December 31, 2016, Kent estimated that Devon had a fair value of $3,000,000. The net identifiable assets of the Devon (excluding goodwill) had a book value of $2,700,000 at that time. What amount of loss on impairment of goodwill should Kent record in 2016?

Answer 1

$100,000 loss

Step-by-step explanation:

FV of Devon $3,000,000

Less Net Identifiable Assets (excluding goodwill) $2,700,000

Implied Goodwill $300,000

Goodwill per books ($400,000)

Loss to be recognized $100,000

Therefore the amount of loss on impairment of goodwill should Kent record in 2016 is $100,000