Reference no: EM131761501
Question: On May 31, 2015, Walker Company (a US company) paid US $4,000,000 to acquire all of the common stock of Hayden Corporation (an Australian company), which now became a division of Walker. Hayden reported the following US$ balance sheet at the time of the acquisition:
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Book Value $
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Fair Value $
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Current Assets
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900,000
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1,500,000
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|
Noncurrent Assets
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2,700,000
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2,300,000
|
|
Current liabilities
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(600,000)
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(700,000)
|
|
Long-term liabilities
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(500,000)
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(400,000)
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At December 31, 2015, Hayden reports the following US$ balance sheet information:
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Book Value $
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Fair Value $
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Current Assets
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800,000
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400,000
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|
Noncurrent Assets (excluding Goodwill)
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1,500,000
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1,100,000
|
|
Current liabilities
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(700,000)
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(700,000)
|
|
Long-term liabilities
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(500,000)
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(400,000)
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During the annual impairment test conducted on December 31, 2015, it was determined that the fair value of the Hayden division as a whole would be equal to the present value (using a discount rate of 10%) of the following estimated future cash follows:
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December 31, 2016
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December 31, 2017
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December 31, 2018
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December 31, 2019
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December 31, 2020
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$265,000
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$265,000
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$265,000
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$265,000
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$265,000
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Required: (a) Compute the amount of goodwill recognized, if any, on 5/31/15.
(b) Determine the goodwill impairment loss, if any, to be recorded on 12/31/15.
(c) On the assumption that the fair value of Hayden on December 31, 2015 was $1,700,000 (instead of using present values), determine the goodwill impairment loss, if any, to be recorded.
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