35. Stanwid Compay provided the following information: Fairvalue of the reportin

Question

35. Stanwid Compay provided the following information: Fairvalue of the reporting unit, including goowill Fairvalue of the net assets, excluding goodwill 1400,C0o E,CH Book value of net awsets, excluding gooowill Add:Carrying value of goowill Carrying value of the reporting unit, including goodwill 1,000,CCD 6CO,GE GEOJG 1,600,COo The qualrtative assessment of goodwil is completed and it is more likely than not that goodwill is impaired Performthe quantitative analysis to determine the required joumal entry to record the goodwill impairment loss. A Quantitative assessment indicates no impairment loss exists. No joumal entry B Dr. Impairmenit Loss on Goodwill C Dr. Impairment Loss on Goodwill D Dr. Impairmenit Loss on Goodwill required 4G0,0EH Cr. Goodwill 4G0,0EH 20O,CIO Cr. Goodwill 20O,CIO 10O,CIO Cr. Goodwill 10O,CIO

Explanation / Answer

Step 1:Implied Fair value of goodwill= 140000-120000 = 20000

Step 2: By analysing we can know that the carrying value of goodwill is greater than implied fair value of goodwill by $40000(60000-20000). So there is a need to impair goodwill ( subject to maximum of carrying amount).Once recognised the subsequent reversal of impairment loss is not permitted. So the answer will be" B"..

Dr. Impairment loss of goodwill 40000

Cr. Goodwill 40000   

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