Question 1 On September 1, 2017, Novak Corporation acquired Tunneling Limited fo

Question

Question 1 On September 1, 2017, Novak Corporation acquired Tunneling Limited for a cash payment of $861,900. At the time of purchase, Tunneling's statement of financial position showed assets of $896,400, liabilities of $466,600, and owners' equity of $429,800. The fair value of Tunneling's assets is estimated to be $1,166,900. Assume that Novak Corporation is a public company and that the goodwill was allocated entirely to one cash-generating unit (CGU). Two years later, information about the CGU is as follows: carrying amount $3,471,000, the value in use $3,397,400, and the fair value less costs to sell $3,302,400. Determine if the goodwill is impaired. Goodwill is Calculate the goodwill impairment loss. (If goowill is not impaired, please enter 0.) Goodwill impairment loss

Explanation / Answer

Net assest taken over = Fair Value of assets - Liabilities

= 1166900 - 466600 = 700300

Cash payment for acquisition = 861900

Amount of Goodwill = Cash payment for acquisition - Net assest taken over

= 861900 - 700300 = 161600

Goodwill is $161600

Impairment loss = Carrying amount - Fair Value = 3471000 - 3302400 = 168600

Impairment loss is greater than amount of goodwill. So, Goodwill impairment loss will be $161600.

Goodwill impairment loss = $161600

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