Following its acquisition of the net assets of Dan Company,Empire Company assigned goodwill of $60,000 to one of the reporting divisions.Information for this division follows:

-Based on the preceding information,what amount of goodwill impairment will be recognized for this division if its fair value is determined to be $195,000?
A)$15,000
B)$30,000
C)$60,000
D)$55,000

Question

Following its acquisition of the net assets of Dan Company,Empire Company assigned goodwill of $60,000 to one of the reporting divisions.Information for this division follows:
 
-Based on the preceding information,what amount of goodwill impairment will be recognized for this division if its fair value is determined to be $195,000?
A)$15,000 
B)$30,000 
C)$60,000 
D)$55,000

Quizplus · Accepted Answer

Goodwill impairment is recognized when the carrying value (in this case, $60,000) exceeds the fair value of the reporting unit (in this case, $195,000). The impairment loss is equal to the excess of the carrying value over the fair value. Therefore, the impairment loss for this division would be $45,000 ($60,000 - $195,000). However, the question asks for the amount of goodwill impairment to be recognized, which is limited to the amount of goodwill originally assigned to the reporting unit. Therefore, the goodwill impairment recognized would be $15,000 ($60,000 original goodwill assigned - $45,000 impairment loss). The correct answer is A) $15,000.

Following Its Acquisition of the Net Assets of Dan Company,Empire