Goodwill Impairment
Buyer Company acquired Target Company on January 1. As part of the acquisition, $1,000 in goodwill was recognized; this goodwill was assigned to Buyer’s Manufacturing reporting unit. On December 31, it was estimated that the future cash flows expected to be generated by the Manufacturing reporting unit are $350 at the end of each year for the next 10 years. The appropriate interest rate is 10%. The fair values and book values of the assets and liabilities of the Manufacturing reporting unit are as follows:
|
|
Book Values |
Fair Values |
|
Identifiable assets |
$3,500 |
$4,000 |
|
Goodwill |
1,000 |
? |
|
Liabilities |
2,000 |
2,000 |
Make the journal entry necessary to recognize any goodwill impairment loss.