Question

Beerbo Corporation purchased Mitter Lite Company three years ago. As a result of the acquisition, Beerbo recorded goodwill of $400,000 at that time and created the Mitter Lite Division (MLD). Today, the MLD's net assets, including the goodwill, have a carrying amount of $800,000. The fair value of the division is estimated to be $1,000,000. Is the goodwill (associated with the MLD) impaired?
Prepare Beerbo's journal entry, if necessary, to record the loss on impairment.
Input zero in all spaces if the patent is not impaired
Beerbo has the following account titles available in its general ledger:
a. Cash
b. Supplies
c. Goodwill
d. Accumulated Depreciation
e. Depreciation Expense
f. Amortization Expense
g. Loss on Impairment
Assume Beerbo has a December 31 fiscal year-end.
Input dollar amounts with commas, rounded to the nearest dollar.
Use appropriate account titles. DR. CR. .. ..................5

Answer 1

Answer: It is not impaired

Explanation:

Goodwill $ 400,000

Carrying amount. $ 800,000

Fair Value $ 1,000,000

Here, the fair value is more than the carrying amount. When the fair value or

the market value is more than the carrying amount, there is no need of the impairment of goodwill.

a.Goodwill associated with the MLD is not impaired because the fair value is greater than the carrying amount of MLD's net assets including the goodwill.

b. No journal entry is required, since there is no impairment.