Leon Corp. purchased Spinks Co. 4 years ago and at that time recorded goodwill of $480,000. The Sinks Division's net assets, including goodwill, have a carrying amount of $1,150,000. The fair value of the division is estimated to be $1,200,000.

Instructions

(a) Explain whether or not Leon Corp. must prepare an entry to record impairment of the goodwill. Include the entry, if necessary.
(b) Repeat instruction

(a) assuming that the fair value of the division is estimated to be $1,070,000 and the implied goodwill is $360,000.

Question

Leon Corp. purchased Spinks Co. 4 years ago and at that time recorded goodwill of $480,000. The Sinks Division's net assets, including goodwill, have a carrying amount of $1,150,000. The fair value of the division is estimated to be $1,200,000.

Instructions

(a) Explain whether or not Leon Corp. must prepare an entry to record impairment of the goodwill. Include the entry, if necessary.
(b) Repeat instruction

(a) assuming that the fair value of the division is estimated to be $1,070,000 and the implied goodwill is $360,000.

Quizplus · Accepted Answer

The Answer of Leon Corp. purchased Spinks Co. 4 years ago and at that time recorded goodwill of $480,000. The Sinks Division's net assets, including goodwill, have a carrying amount of $1,150,000. The fair value of the division is estimated to be $1,200,000.

Instructions

(a) Explain whether or not Leon Corp. must prepare an entry to record impairment of the goodwill. Include the entry, if necessary.
(b) Repeat instruction

(a) assuming that the fair value of the division is estimated to be $1,070,000 and the implied goodwill is $360,000.

Leon Corp Purchased Spinks Co