Infinity Corporation acquired 80 percent of the common stock of an Egyptian company on January 1,2008.The goodwill associated with this acquisition was $18,350.Exchange rates at various dates during 2008 follow: Goodwill suffered an impairment of 20 percent during the year.If the functional currency is the U.S.dollar,how much goodwill impairment loss should be reported on Infinity's consolidated statement of income for 2008?
A)$3,680
B)$3,670
C)$3,690
D)$3,700

Question

Quizplus · Accepted Answer

To determine the goodwill impairment loss, we need to convert the goodwill balance from the Egyptian pound (functional currency of the acquired company) to the U.S. dollar (functional currency of Infinity Corporation) using the exchange rates at the impairment date. The impairment loss is calculated as the difference between the carrying value of goodwill and its fair value.

Carrying value of goodwill = $18,350
Impairment loss = 20% of $18,350 = $3,670

Therefore, the answer is B.

Infinity Corporation Acquired 80 Percent of the Common Stock of an Egyptian