Question

On December 31, the fair value of Blossom is estimated to be $820,800. The carrying value of Blossom’s net identifiable assets, including the goodwill, at year-end is $855,000. Prepare Cullumber’s journal entry, if necessary, to record impairment of goodwill.

Answer 1

Dr goodwill impairment $34200

Cr goodwill $34200

Step-by-step explanation:

The fact that the fair value of Blossom’s net identifiable assets is less than the carrying value is a strong indication that the goodwill has been impaired and the impairment is computed thus:

Goodwill impairment=Fair value of net assets-carrying value

fair value of net assets=$820,800

Carrying value of net assets=$855,000

goodwill impairment=$855,000-$820,800=$34200

The double entries would be a debit to goodwill impairment loss account in the statement of profit or loss and a credit to goodwill.