Question

Problem 4

On July 31, 2017, Sheridan Company paid $2,750,000 to acquire all of the common stock of Conchita Incorporated, which became a division of Sheridan. Conchita reported the following balance sheet at the time of the acquisition.

$740,000

$510,000

2,450,000

410,000

$3,190,000

2,270,000

$3,190,000

It was determined at the date of the purchase that the fair value of the identifiable net assets of Conchita was $2,500,000. Over the next 6 months of operations, the newly purchased division experienced operating losses. In addition, it now appears that it will generate substantial losses for the foreseeable future. At December 31, 2017, Conchita reports the following balance sheet information.

$470,000

2,360,000

(620,000

)

(420,000

)

$1,790,000

It is determined that the fair value of the Conchita Division is $1,850,000. The recorded amount for Conchita’s net assets (excluding goodwill) is the same as fair value, except for property, plant, and equipment, which has a fair value $110,000 above the carrying value.

Current assets

 

$740,000

 

Current liabilities

 

$510,000

Noncurrent assets

 

2,450,000

 

Long-term liabilities

 

410,000

   Total assets

 

$3,190,000

 

Stockholders’ equity

 

2,270,000

 

 

 

 

Total liabilities and stockholders’ equity

 

$3,190,000

of goodwill recognized The amount of goodwill Determine the impairment loss, rany, to be recorded The impairment loss new,



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