FINANCIAL ACCOUNTING
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ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Alfonso Inc. acquired 100 percent of the voting shares of BelAire Company on January 1, 2020. In exchange, Alfonso paid $387,250 in cash and issued 100,000 shares of its own $1 par value common stock. On this date, Alfonso’s stock had a fair value of $15 per share. The combination is a statutory merger with BelAire subsequently dissolved as a legal corporation. BelAire’s assets and liabilities are assigned to a new reporting unit.
The following shows fair values for the BelAire reporting unit for January 1, 2020 along with respective carrying amounts on December 31, 2021.
| BelAire Reporting Unit | Fair Values 1/1/20 |
Carrying Amounts 12/31/21 |
||||
| Cash | $ | 95,000 | $ | 50,000 | ||
| Receivables | 193,000 | 245,000 | ||||
| Inventory | 217,500 | 260,000 | ||||
| Patents | 638,000 | 741,000 | ||||
| Customer relationships | 599,250 | 570,000 | ||||
| Equipment (net) | 354,000 | 267,000 | ||||
| ? | 516,000 | |||||
| Accounts payable | (161,000 | ) | (219,000 | ) | ||
| Long-term liabilities | (564,500 | ) | (486,000 | ) | ||
Note: Parentheses indicate a credit balance.
-
Prepare Alfonso’s
journal entry to record the assets acquired and the liabilities assumed in the BelAire merger on January 1, 2020. Note: Enter cash paid and cash received as two separate amounts. -
On December 31, 2021, Alfonso opts to forgo any goodwill impairment qualitative assessment and estimates that the total fair value of the entire BelAire reporting unit is $1,720,000. What amount of goodwill impairment, if any, should Alfonso recognize on its 2021 income statement?
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