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Calculate goodwill recognized on business combination day

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Reference no: EM132861201

Question - Company A paid $500,000 for all of the outstanding common stock of Company B in a business combination initiated and completed on January 1, Year 3. On that date, the fair value of Company B's identifiable assets and liabilities were $720,000 and $260,000, respectively. Company B is treated as a reporting unit, and the entire amount of goodwill recognized in the business combination is assigned to it.

On December 31, Year 4, the company determined that it is necessary to perform the quantitative impairment test for goodwill. No impairment loss of goodwill was previously recognized. On December 31, Year 4, the fair value of Company B was $585,000 and its carrying amount, including goodwill, was $600,000.

Required -

1. Calculate the goodwill recognized on the business combination day?

2. Calculate the carrying amount of goodwill on December 31, Year 4, before the impairment test?

3. Calculate the impairment loss, if any, recognized in the Year 4 income statement?

4. Calculate the carrying amount of goodwill on December 31, Year 4, after the impairment test?

Reference no: EM132861201

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