Parsons Company acquired 90% of Roxy Company several years ago and recorded goodwill of $200,000 at that date. During 2015 an analysis of the fair value of Roxy's assets determined an impairment of goodwill in the amount of $50,000. What journal entry would be made by Parsons regarding the impairment of goodwill?

A) Journal entry A.
B) Journal entry B.
C) Journal entry C.
D) Journal entry D.
E) Journal entry E.

Question

Parsons Company acquired 90% of Roxy Company several years ago and recorded goodwill of $200,000 at that date. During 2015 an analysis of the fair value of Roxy's assets determined an impairment of goodwill in the amount of $50,000. What journal entry would be made by Parsons regarding the impairment of goodwill?
 
A) Journal entry A. 
B) Journal entry B. 
C) Journal entry C. 
D) Journal entry D. 
E) Journal entry E.

Quizplus · Accepted Answer

According to the information provided, Parsons Company acquired 90% of Roxy Company and recorded goodwill of $200,000 at that date. During 2015, an analysis of the fair value of Roxy's assets determined an impairment of goodwill in the amount of $50,000. To record the impairment of goodwill, Parsons would debit the impairment loss account for $50,000 and credit the goodwill account for $50,000. Therefore, the journal entry to record the impairment of goodwill would be:
Impairment loss  $50,000
Goodwill   $50,000
Choice C represents this journal entry.

Parsons Company Acquired 90% of Roxy Company Several Years Ago