Accounting for Goodwill impairment Parent company acquired the net assets of sub

Question

Accounting for Goodwill impairment

Parent company acquired the net assets of subsidiary company in 2007 for $50 Million, Parent company recorded $1,500,000 of goodwill on the date of acquisition. No armortization or impairment of goodwill has been recorded to date.

During 2015, Parent company did an analysis of future cash flows and fair value of Subsidiary's net assets. Parent comapny determined the carrying value of Subsidiary's net assets to be $55 Million and the fair value is determined to be $58.5 Million

Instructions: Record the adjusting journal entry that may be required on the books of Parent Company as of December 31, 2015. (Explain answer and show work)

Explanation / Answer

Goodwill recored on the date of Acquistion = $1500,000

..

Carrying Amount of Net Assets = $55000,000

Fair Value of Net Assets = $58500,000

..

Since carrying amount is less than the fair value of the net assets no Impairement is required.

Therefore , no entry will be passed.

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