In 2017,a corporation purchased a small business for $250,000.The market value of the small business's assets was $400,000,and the market value of the liabilities was $200,000.The corporation recorded goodwill of $50,000 at the time of acquisition.At the end of 2018,it measured goodwill and found it had a remaining fair value of only $20,000.At year-end 2018,the corporation will ________.

Question

Quizplus · Accepted Answer

The corporation will need to record an impairment loss to reflect the decrease in the fair value of goodwill from $50,000 to $20,000. Impairment losses are recognized when the carrying amount of an asset (goodwill in this case) exceeds its recoverable amount (fair value in this case). Goodwill is not a sale of asset, depletion is not applicable in this scenario, and there is no gain in goodwill as the fair value has decreased.

In 2017,a Corporation Purchased a Small Business for $250,000