Soo,000 Non-current liabilities 500,00 600.00 500,000 Current lhabilities Total equity and iabilities S3.500,0c alue of the identifiable net assets of Conchita was erating losses. In addition, it nowappears that it v the following statement of financial position info $ 450.0

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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Question 2
Piz.5 L03.) (Goodwill, Impairment) On July 31, 2022. Mexico Company paid Se o00.o00 to acquire all of the ordinary shares of
Condhita Incorporated, which became a division (cash-generating unit of Mexico. Conchita reported the following statement of financial position
at the time of the acquisition
$2.400,000
Non-current assets S2,700,000 Equity
Current assets
Total assets
Soo,000 Non-curent liabihties
$3.500,000 Current liabilities
500,000
600.000
Total equity and liabilities S3.500,000
It was determined at the date of the purchase that the fair value of the identifiable net assets of Conchita was S2-750,000.Over the next6 months
of operations, the newly purchased division experienced operating losses. In addition, it now appears that it will generate substantial losses for the
foreseeable future. At December g1, 2022, Conchita reports the following statement of financial position information
S 450,000
Current assets
Non-eurrent assets (including goodwill recognized ia purchase) 2400,000
Current liabilities
Non-current liabilities
Goo.000)
(500,000)
$1650.000
Net assets
It is determined that the recoverable amount of the Conchita Dvision is Sa S30.000.
Instructions
a. Compute the amount of goodwill recognized, if any, on July 3a 2002
b. Determine the impairment loss, if any, to be recorded on December g.2022.
CAssume that the recoverable amount of the Conchita Division is Sa.6o0.copinstead of S1850.000. Determine the inpairmentloss itany to
be recorded on December 31, 2o22.
d Prepare the journal entry to record the impairment loss. if any, and indicate where the loss soa be reported in the income statement.
Transcribed Image Text:Question 2 Piz.5 L03.) (Goodwill, Impairment) On July 31, 2022. Mexico Company paid Se o00.o00 to acquire all of the ordinary shares of Condhita Incorporated, which became a division (cash-generating unit of Mexico. Conchita reported the following statement of financial position at the time of the acquisition $2.400,000 Non-current assets S2,700,000 Equity Current assets Total assets Soo,000 Non-curent liabihties $3.500,000 Current liabilities 500,000 600.000 Total equity and liabilities S3.500,000 It was determined at the date of the purchase that the fair value of the identifiable net assets of Conchita was S2-750,000.Over the next6 months of operations, the newly purchased division experienced operating losses. In addition, it now appears that it will generate substantial losses for the foreseeable future. At December g1, 2022, Conchita reports the following statement of financial position information S 450,000 Current assets Non-eurrent assets (including goodwill recognized ia purchase) 2400,000 Current liabilities Non-current liabilities Goo.000) (500,000) $1650.000 Net assets It is determined that the recoverable amount of the Conchita Dvision is Sa S30.000. Instructions a. Compute the amount of goodwill recognized, if any, on July 3a 2002 b. Determine the impairment loss, if any, to be recorded on December g.2022. CAssume that the recoverable amount of the Conchita Division is Sa.6o0.copinstead of S1850.000. Determine the inpairmentloss itany to be recorded on December 31, 2o22. d Prepare the journal entry to record the impairment loss. if any, and indicate where the loss soa be reported in the income statement.
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