The fair value of net identifiable assets of a reporting unit of X Company is $300,000.On X Company's books,the carrying value of this reporting unit's net assets is $350,000,including $60,000 goodwill.If the fair value of the reporting unit is $335,000,what amount of goodwill impairment will be recognized for this unit?

Question

Quizplus · Accepted Answer

The first step is to compare the carrying value of the reporting unit ($350,000) to the fair value of the reporting unit ($335,000). Since the fair value is lower, there may be goodwill impairment. To calculate the amount of goodwill impairment, we need to subtract the fair value of the net identifiable assets ($300,000) from the carrying value of the reporting unit ($350,000), which gives us $50,000. Then, we compare this amount to the carrying value of goodwill ($60,000). Since the carrying value of goodwill is higher than the implied value of goodwill ($50,000), we recognize an impairment loss equal to the difference, which is $10,000. Therefore, the correct answer is C.

The Fair Value of Net Identifiable Assets of a Reporting