On June 30, 2015, P Company paid $5,750,000 to acquire all of the common stock of S Corporation, which became a division of P Company. S Corporation reported the following balance sheet at the time of the acquisition:
|Current Assets||$900,000||Current Liabilities||$600,000|
|Noncurrent Assets||$3,700,000||Long-term Liabilities||$1,500,000|
|Total Assets||$4,600,000||Total Liabilities and Stockholders’ Equity||$4,600,000|
It was determined at the date of the purchase that the fair value of the identifiable net assets of S Corporation was $4,800,000.
(a) Compute the amount of goodwill recognized, if any, on May 31, 2015.
At December 31, 2015, S Corporation reports the following balance sheet information:
|Noncurrent Assets (including goodwill recognized in purchase)||$3,400,000|
- Management determined that the fair value of the S corporation division is $1,050,000.
- The recorded amount for S Corporation’s net assets (excluding goodwill) is the same as fair value, except for property, plant, and equipment, which has a fair value of $200,000 above the carrying value.
(b) Determine the impairment loss, if any, to be recorded on December 31, 2015.