Solved: 1. On January 2, 2017, David Corporation Paid $1,2… |

1. On January 2, 2017, David Corporation paid $1,200,000 forBuster Company in a transaction properly accounting for as an assetacquisition. The book values and fair values of Buster Company’snet assets on January 2, 2017 were as follows:
BookValue               Fair Value
AccountReceivable                        400,000                  350,000
Inventory                                             50,000                    65,000
Plant andEquipment                       250,000                  450,000
AccountsPayable                             40,000                        50,000
MortgagePayable                              150,000                  150,000
                                                              510,000                   665,000
A. What will be the goodwill recorded from the abovetransaction? Show your calculation.
B. If David Corporation’s Accounts Receivable balanceimmediately prior to the acquisition was $500,000. What will DavidCorporation’s Accounts Receivable balance be immediately after theabove acquisition? Show your calculation.
2. To determine whether goodwill impairment exists, U.S. GAAPrequires a two-step process (complete the statements):
Step 1 – Compares F.V. (fair value) of the Reporting Unit to_____________________________.
Step 2 – If necessary, first compares the F.V. of the ReportingUnit to _____________________.
3. If goodwill impairment is determined to exist, the entry torecord the impairment is as follows:
                                                                                                           Debit     Credit
Goodwill                                                                                      $xxx
                 Impairment Loss -Goodwill                                           $xxx
A. True
B. False
Explain your answer:
 
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