Determine if goodwill is impaired at the end of the year

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On January 1 of the current year, Company A purchases 100% of Company B for $8.4 million. At the time of the acquisition, the fair value of Company B's tangible net assets (excluding goodwill) is $8.1 million. Assume the fair value of Company B's falls to $6.25 million (based on future cashflows) and the value of Company B's tangible net assets is estimated at $6.15 million as of December 31.

a) Determine the value of the goodwill (if any) that would be recorded by Company A at the time of acquisition.

b) Determine if goodwill is impaired at the end of the year, and if so the amount of the impairment

c) What effect does the impairment of goodwill have on Company A's financial statements

Reference no: EM131794370

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