On January 1, 2022, Green Company paid $1,000,000 to acquire White Corporation, which became the White Division of Green Company. White Corporation’s balance sheet at the time of the acquisition showed: Cash $ 50,000 Accounts Payable $ 400,000 Accounts Receivable 150,000 Notes Payable 250,000 Equipment (net) 350,000 Building (net) 950,000 Stockholders’ equity 850,000 Total liabilities and Total assets $1,500,000 stockholders’ equity $1,500,000 At the date of the purchase, January 1, 2022, it was determined that the carrying value of the assets and liabilities of White were equal to their fair values except that the Equipment was overvalued by $125,000 and the Building was undervalued by $50,000. At December 31, 2022, the White Division reports the following balance sheet information: Cash $ 350,000 Accounts Receivable 250,000 Equipment (net) 300,000 Building (net) 700,000 Goodwill _______ Accounts Payable 400,000 Notes Payable 350,000 It is determined that the fair value of the White Division is $1,175,000. The recorded amounts for White Division’s assets and liabilities on December 31, 2022 are the same as fair value. REQUIRED: A. What is the amount of Goodwill, if any, recorded on January 1, 2022? ___________________ B. Determine the impairment loss, if any, to be recorded on December 31, 2022. Show clearly all of your calculations—with notations as to what your numbers represent. Prepare the journal entry to record the impairment loss, if any, on December 31, 2022. If no entry is to be prepared, explain why not.
On January 1, 2022, Green Company paid $1,000,000 to acquire White Corporation, which became the White
Division of Green Company. White Corporation’s
Cash $ 50,000 Accounts Payable $ 400,000
Equipment (net) 350,000
Building (net) 950,000
Total liabilities and
Total assets $1,500,000 stockholders’ equity $1,500,000
At the date of the purchase, January 1, 2022, it was determined that the carrying value of the assets and
liabilities of White were equal to their fair values except that the Equipment was overvalued by $125,000 and
the Building was undervalued by $50,000.
At December 31, 2022, the White Division reports the following balance sheet information:
Cash $ 350,000
Accounts Receivable 250,000
Equipment (net) 300,000
Building (net) 700,000
Accounts Payable 400,000
Notes Payable 350,000
It is determined that the fair value of the White Division is $1,175,000. The recorded amounts for White
Division’s assets and liabilities on December 31, 2022 are the same as fair value.
REQUIRED:
A. What is the amount of Goodwill, if any, recorded on January 1, 2022? ___________________
B. Determine the impairment loss, if any, to be recorded on December 31, 2022. Show clearly all of your
calculations—with notations as to what your numbers represent. Prepare the
the impairment loss, if any, on December 31, 2022. If no entry is to be prepared, explain why not.
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