Tokyo Enterprises has four divisions.It acquired on of them, Green Products, on January 1, 2011 for ¥480,000,000, and recorded goodwill of ¥60,900 as a result of that purchase.At December 31, 2011, Green Products had a recoverable amount of ¥444,000,000.The carrying value of the Company's net assets at December 31, 2011 was ¥426,000,000(including goodwill).What amount of loss on impairment of goodwill should Tokyo record in 2011?

Question

Quizplus · Accepted Answer

The impairment loss is calculated as the carrying value of the net assets including goodwill minus the recoverable amount. The carrying value is ¥426,000,000, and the recoverable amount is ¥444,000,000. Since the carrying value is less than the recoverable amount, there is no impairment loss. However, the question seems to imply a misunderstanding, as the recoverable amount should be compared to the carrying amount of goodwill. The correct calculation should be: Goodwill recorded was ¥60,900,000, and the impairment loss is the difference between the carrying value of goodwill and the recoverable amount, which is ¥480,000,000 - ¥444,000,000 = ¥36,000,000. However, since the carrying value of the net assets is less than the recoverable amount, the impairment loss should be ¥18,000,000.

Tokyo Enterprises Has Four Divisions