1. (TCO C) Blue Company recently acquired three businesses, recognizing goodwill in each acquisition. Acquired goodwill was allocated to the three reporting units: Yellow, Green and Purple. Blue provides the following information in performing the 2009 annual review for impairment:
Company Carrying Value Fair Value Valuation of Reporting Unit (including goodwill)
Yellow Tangible assets $ 300,000 $ 320,000 $ 525,000
Trademark $ 20,000 $ 10,000
Licenses $ 85,000 $ 90,000
Liabilities $ 20,000 $ 20,000
Goodwill $ 130,000 ?
Green Tangible assets $ 250,000 $ 400,000 $ 450,000
Trademark $ 25,000 $ 50,000
Licenses $ 18,000 $ 18,000
Goodwill $ 140,000 ?
Purple Tangible assets $ 120,000 $ 120,000 $ 215,000
Unpatented technology $ - $ 50,000
Customer list $ 35,000 $ 45,000
Goodwill $ 75,000 ?
Required:
(A) Which of Blue's reporting units require both steps to test for goodwill impairment?
(B) How much goodwill impairment should Blue report for 2009?
(Points : 25)
2. (TCO E) Several years ago Polar Inc. purchased an 80% interest in Icecap Co. The book values of Icecap's asset and liability accounts at that time were considered to be equal to their fair values. Polar paid an amount corresponding to the underlying book value of Icecap so that no allocations or goodwill resulted from the purchase price.
The following selected account balances were from the individual financial records of these two companies as of December 31, 2009:
Assume that Polar sold inventory to Icecap at a markup equal to 40% of cost. Intercompany transfers were $126,000 in 2008 and $154,000 in 2009. Of this inventory, $39,200 of the 2008 transfers were retained and then sold by Icecap in 2009 while $58,800 of the 2009 transfers were held until 2010.
Required:
On the consolidated financial statements for 2009, determine the balances that would appear for the following accounts:
Cost of Goods Sold,
Inventory and
Non-controlling Interest in Subsidiary's Net Income. (If you use a gross profit percentage, do not round the calculation.)
Company Carrying Value Fair Value Valuation of Reporting Unit (including goodwill)
Yellow Tangible assets $ 300,000 $ 320,000 $ 525,000
Trademark $ 20,000 $ 10,000
Licenses $ 85,000 $ 90,000
Liabilities $ 20,000 $ 20,000
Goodwill $ 130,000 ?
Green Tangible assets $ 250,000 $ 400,000 $ 450,000
Trademark $ 25,000 $ 50,000
Licenses $ 18,000 $ 18,000
Goodwill $ 140,000 ?
Purple Tangible assets $ 120,000 $ 120,000 $ 215,000
Unpatented technology $ - $ 50,000
Customer list $ 35,000 $ 45,000
Goodwill $ 75,000 ?
Required:
(A) Which of Blue's reporting units require both steps to test for goodwill impairment?
(B) How much goodwill impairment should Blue report for 2009?
(Points : 25)
2. (TCO E) Several years ago Polar Inc. purchased an 80% interest in Icecap Co. The book values of Icecap's asset and liability accounts at that time were considered to be equal to their fair values. Polar paid an amount corresponding to the underlying book value of Icecap so that no allocations or goodwill resulted from the purchase price.
The following selected account balances were from the individual financial records of these two companies as of December 31, 2009:
Assume that Polar sold inventory to Icecap at a markup equal to 40% of cost. Intercompany transfers were $126,000 in 2008 and $154,000 in 2009. Of this inventory, $39,200 of the 2008 transfers were retained and then sold by Icecap in 2009 while $58,800 of the 2009 transfers were held until 2010.
Required:
On the consolidated financial statements for 2009, determine the balances that would appear for the following accounts:
Cost of Goods Sold,
Inventory and
Non-controlling Interest in Subsidiary's Net Income. (If you use a gross profit percentage, do not round the calculation.)
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