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enyata [817]
3 years ago
11

Assume the equity method Equity Investment account relating to a subsidiary has a reported balance of $9,036,000, including $864

,000 of Goodwill. The fair value of the subsidiary is $8,100,000. The fair value of the subsidiary's individually identifiable net assets is $7,740,000. The subsidiary has only one reporting unit, which is the same as the overall entity.1. For this fact set, determine whether Goodwill is impaired.2. Prepare the required journal entry if you determine Goodwill is impaired.
Business
1 answer:
andrew-mc [135]3 years ago
5 0

Answer:

The impairment amount will be "$504,000". A further explanation is below.

Explanation:

The given values are:

Goodwill,

= $864,000

Subsidiary fair value,

= $8,100,000

Subsidiary's individually identifiable net assets,

= $7,740,000

Now,

(1)

The impairment amount will be:

= Goodwill-(Subsidiary \ fair \ value-Identifiable \ net \ assets)

On substituting the values, we get

= 864,000 - (8,100,000- 7,740,000)

= 864,000-360,000

= 504,000 ($)

(2)

The journal entry is:

<u>Description                                  Debit                       Credit</u>

Equity income                          $504,000

Equity investment                                                  $504,000

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Answer:

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Here, Gracious ltd could raise funds by buying of shares in a company in India hence gives the company an avenue to hold shares in foreign country.

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3. American depository receipts. These are negotiable capital market instruments, issued by a bank in the United States, which shows the number of shares held by a foreign company, trading in the US capital market. A company could use this as a way of raising funds in the India capital market because it is well backed by the bank in the country where the company is.

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