On May 28, 2013, Pesky Corporation acquired all of the outstanding common stock

Question

On May 28, 2013, Pesky Corporation acquired all of the outstanding common stock of Harman, Inc., for $540 million. The fair value of Harman's identifiable tangible and intangible assets totaled $596 million, and the fair value of liabilities assumed by Pesky was $170 million.

     Pesky performed a goodwill impairment test at the end of its fiscal year ended December 31, 2013. Management has provided the following information:

Determine the amount of goodwill that resulted from the Harman acquisition. (Enter your answer in millions.)

Determine the amount of goodwill impairment loss that Pesky should recognize at the end of 2013, if any. (Enter your answers in millions.)

On May 28, 2013, Pesky Corporation acquired all of the outstanding common stock of Harman, Inc., for $540 million. The fair value of Harman's identifiable tangible and intangible assets totaled $596 million, and the fair value of liabilities assumed by Pesky was $170 million.

     Pesky performed a goodwill impairment test at the end of its fiscal year ended December 31, 2013. Management has provided the following information:

Explanation / Answer

Hi,

Please find the answers as follows:

Part 1:

Consideration = 540

Less Fair Value of Net Assets - Liabilities = 596 - 170 = 426

Goodwill = 114 million

Answer is 114 million.

Part 2:

Calculate Implied Goodwill:

Fair value of Harman, Inc. = 520

Fair value of Harman's net assets (excluding goodwill) = 460

Implied Value of Goodwill = 60

Calculate Impairment Loss:

Book Value of Goodwill = 114

Less Implied Value of Goodwill = 60

Impairment Loss = 54 million

Answer is 54 million.

Thanks.

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