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Implied goodwill – fair value of unit - net identifiable assets of the unit2.If implied goodwill is less than the carrying amount of goodwill, record the impairment lossProblems:1.Which of the following is an intangible asset?a.Cash surrender value of executive life insurance policiesb.Trading securitiesc. Franchisesd.Deferred income tax assetse.Prepaid taxes2.How is purchased goodwill reported on the financial statements?
3.Usually, an impairment loss occurs when the asset’s fair market value falls below what?USE THE FOLLOWING INFORMATION TO ANSWER THE NEXT TWO QUESTIONS:Chelsea Toys & Games Corporation has several divisions included in the company. One of those divisions, Charles Tools, Inc., is being reviewed for possible goodwill impairment. Charles Tools was purchased three years ago for a cost of $4million. Goodwill from that purchase amounted to $1.2million. Net assets of the division including the $1.2 million goodwill are $2,900,000. The fair value of the Charles Tools division is $3.3million. 4.What is indicated in the first phase of the analysis?5.Suppose the fair value of Charles Tools is $2,600,000. What amount of impairment loss, if any, should be recorded?a. 0b. $300,000c. $400,000d. $500,000e. $200,0001. c2. c3. a4. dAnswers to problems: