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Q12-8BE

Expert-verified
Intermediate Accounting (Kieso)
Found in: Page 638

Short Answer

Use the information provided in BE12-7. Assume that the fair value of the division is estimated to be $750,000 and the implied goodwill is $350,000. Prepare Waters’ journal entry, if necessary, to record impairment of the goodwill.

Debited loss on Impairment by $50,000 and credited Goodwill by $50,000.

See the step by step solution

Step by Step Solution

Step-by-Step SolutionStep 1: Calculation

The reporting unit’s fair value ($750,000) is less than its carrying value ($800,000), indicating an impairment. The loss is the difference between the $400,000 in recorded goodwill and the $350,000 in implied goodwill.

Step 2: Journal Entry

Date

Particulars

Debit

Credit

Loss on Impairment ($400,000 - $350,000)

$50,000

Goodwill

$50,000

(Being loss on impairment is recorded)

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