🏷️ LIMITED TIME OFFER: GET 20% OFF GRADE+ YEARLY SUBSCRIPTION →
Log in
Accounting
1
answer
0
watching
197
views

Information regarding the impairment of goodwill that specifically concerns Simon is related to the acquisition of Pizazz, Inc., (the leading manufacturer of hair color products in the U.S.) that occurred in 2016 and resulted Salon Solutions recording $125 million in goodwill related to this acquisition in 2016. After acquisition, Pizazz Inc. continues to operate as a separate company and is considered a reporting unit. At the end of 2017, events and circumstances indicated that it is “more likely than not” that the fair value of Pizazz is less than book value. Simon determined the following information pertaining to Pizazz: As of 12/31/17 the book value of Pizazz’s net assets is $560 million, including the $125 million in goodwill. Pizazz’s estimated fair value as of 12/31/17 is $445 million, and the fair value of all its identifiable tangible and intangible assets, excluding goodwill, is estimated to be $425 million. These estimates were based on prices of comparable businesses. Your firm has delegated to you the task of determining the treatment of goodwill impairment.works cited page)

1. What is the current standards that govern US GAAP treatment of goodwill?

2. What is the current standards that govern US GAAP treatment of goodwill impairment and how to determine the amount of the goodwill impairment loss using the data pertaining to Salon Solutions given above.

3. Prepare the journal entry to record the impairment loss and explain how this loss is reported on the income statement (ignore income tax effects). In addition, if an impairment loss is recorded, indicate the amount of goodwill to be reported on the statement of financial position as of 12/31/17.

4. Whether early adoption of the Financial Accounting Standards Board Accounting Standards Update (FASB ASU) 2017-04 is allowed, and if so, how to determine the amount of the goodwill impairment loss based on early adoption of FASB ASU 2017-04 using the goodwill data pertaining to Salon Solutions given above. Also, if applicable, prepare the journal entry to record the impairment loss per FASB ASU 2017-04 should Salon Solution’s owner elect to adopt FASB ASU 2017-04 early. In addition, if an impairment loss is recorded, indicate the amount of goodwill to be reported on the statement of financial position as of 12/31/17.

5. The required financial statement note disclosures regarding goodwill impairment assuming Salon Solution’s President elects to adopt FASB ASU 2017-04 early (ignore income tax effects).

Watch
1
answer
0
watching
197
views

For unlimited access to Homework Help, a Homework+ subscription is required.

Bunny Greenfelder
Bunny GreenfelderLv2
29 Sep 2019

Unlock all answers

Get 1 free homework help answer.
Already have an account? Log in
Share

Related questions

At the beginning of 2009, Metatec inc. acquired EllsionTechnology Corp for $600 million. In addition to cash, receivables,and inventory , the following asssets and their fair values werealso inquired.

plant and Equipment(Depreciable Assets) 150 million

Patent 40 million

goodwill 100 million

The plant and equipment are depreciated over a 10 year usefullife on a straight line basis. There is no estiamted residualvalue. The patent is estimated to have a 5 year useful life, noresidual value, and is amortized using straightline method.

At the end of 2011 a change in business climate indicated tomanagement that the assets of Ellison might be impaired. Thefollowing amounts have been determined.

Plant & equip.

Undiscovered Sum of future cash flows 80 Million

Fair Value 60 Million

Patent:

Undiscovered sum of future cash flows 20 Million

Fair value 13 Million

Goodwill:

Fair value of Ellison Tech 450 Million

Fair Value of Ellisons net Assets (excluding goodwill) 390Million

Book Value of Ellison net assets ( including goodwill) 470Million- this is after first recording any impairment losses onplant and equipment and the patent.

Required

1.Compute the book value of the plant and equipment and patentat the end of 2011.

2. When should the plant and equipment and the patent be testedfor impairment

3. When should goodwill be tested for impairment

4. Determine the amount of any impairment loss to be recorded ifany for the three assets.

On January 1, 2012 SBC Corporation purchased all the outstandingstock of ABC Inc. paying $2800 (million) cash. As part of the dealSBC assumed all of the liabilies of ABC. Book values and fairvalues of accquired assets and liabilities are shown below:

ABC Balance Sheet (millions)

BOOKValue Fair Value

Current Assets(net) $400 $500

Property, plant andequi. $2000 $2500

Liabilities $600 $700

Requirements:

1. Determine the amount, if any, of goodwill SBC will recordwith this transaction

2. Discuss the subsequent meansurement of Goodwill, includingsummary of the steps that management will take regarding thesubsequent meansurement of Goodwill under USGAAP.

Use this information for 3 and 4-

At the end of 2013, significant labor cost increases haveresulted in sustained declining cash flows for the ABC reportingunit and SBC projects that revenues for the ABC reporting unit willbe significantly less than anticipated. Additional information isas follows (millions):

Fair value of SBC(perappraisal) $1900

Fair value of SBC'snet assets (excludinggoodwill) $1600

Book value of SBC;snet assets (includinggoodwill) $2600

Book value of SBC'snet assets (exludinggoodwiil) $2100

Present value ofSBC's est. future cashflows $2200

3. What amount, if any, will be reported as an impairment losson goodwill under USGAAP at 12/31/13? (Answer should clearlyaddress the steps you had in question 2)

4. What value would be reported for Goodwill on the balancesheet under IFRS at 12/31/13 If ABC is considered a cash generatingunit?

1. On January 1, Year 1, Pungent Corporation acquired 75% of Summer Corporation's 200,000 outstanding common shares for $2,850,000. On January 1, the book value of Summer's net assets was $3,000,000. Book value equaled fair value for all of Summer's assets and liabilities except land, which had a fair value $200,000 greater than book value, and equipment, which had a fair value $150,000 greater than book value. On January 1, Year 1, Summer had a non-compete agreement with a fair value of $300,000. Compute the amount of goodwill (show your work) to be reported on Pungent Corporation's December 31, Year 1 balance sheet under U.S. GAAP?

2. List the 4 steps in applying the Acquisition method of accounting.

3. In a business combination accounted for as an acquisition, the appraised values of the identifiable assets acquired exceeded the acquisition price. Describe how the excess appraised valued should be reported?

4. Direct costs of a business combination, including finders’ fees and consulting fees, are recognized as expenses in the period incurred. True or False

Weekly leaderboard

Home
Homework Help 3,900,000
Accounting 580,000
Start filling in the gaps now
Log in