You are performing an accounting analysis on ABC Company and noted excessive goo

Question

You are performing an accounting analysis on ABC Company and noted excessive goodwill balances relative to reported PPE. The following table was constructed from ABC’s 10-K information. Assume all new goodwill is recognized at the end of the year for the purpose of restatement. Further, assume a tax rate of 30%. Finally, you are starting the restatement process from 2006’s financial statements. ABC has a December 31 fiscal year end. Assume goodwill has a 5-year useful life and that you are adjusting the account.

How much is the goodwill impairment adjustment for 2009?

The overall decrease to Net Income in 2008 for ABC after adjustment would be?

How much Goodwill should on the Balance Sheet in 2008 after all of the restatement adjustments have been made?

2006 2007 2008 2009 beginning balance 20,000,000 23,000,000 26,000,000 31,000,000 New Goodwill 3,000,000 5,000,000 8,000,000 2,000,000 Goodwill Impaired 0 2,000,000 3,000,000 10,000,000 Ending Goodwill 23,000,000 26,000,000 31,000,000 23,000,000

Explanation / Answer

goodwill impaired

2009

goodwill impaired

30% =10,000,000+(68+3000)=100,003068

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