Pizza Entity (PE) acquired Slice Entity (SE) on January 1, 20X2. On that date, PE paid $240,000 to acquire 30% of the ordinary shares of SE (this amount will cause PE to exert significant influence on SE). PE also paid $5,000 for transaction costs on that date. On December 31, 20X2, SE reports $250,000 of net income and declares dividends of $100,000. Also on December 31, PE completes its valuation of SE and determines it is worth $280,000 (less estimated selling costs of $5,000). Should PE recognize an impairment loss on SE, and if so, what should the amount of loss be?

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The Answer of Pizza Entity (PE) acquired Slice Entity (SE) on January 1, 20X2. On that date, PE paid $240,000 to acquire 30% of the ordinary shares of SE (this amount will cause PE to exert significant influence on SE). PE also paid $5,000 for transaction costs on that date. On December 31, 20X2, SE reports $250,000 of net income and declares dividends of $100,000. Also on December 31, PE completes its valuation of SE and determines it is worth $280,000 (less estimated selling costs of $5,000). Should PE recognize an impairment loss on SE, and if so, what should the amount of loss be?

Pizza Entity (PE) Acquired Slice Entity (SE) on January 1