Caesar Company acquired Illusions, Inc. three years ago, and the purchase included $75,000 of goodwill. Illusion's goodwill now has a fair value of $60,000 - how would Caesar account for this difference?

Question

Quizplus · Accepted Answer

When the fair value of goodwill is less than its carrying amount, the difference is considered an impairment loss. To account for this, a journal entry is made, debiting Loss on Impairment of Goodwill and crediting Goodwill for the amount of the impairment loss. In this case, the impairment loss is $15,000 ($75,000 - $60,000).

Caesar Company Acquired Illusions, Inc