Reference no: EM131751461

Problem - 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:

Book Value $	Fair Value $
Current Assets	900,000	1,500,000
Noncurrent Assets	2,700,000	2,300,000
Current liabilities	(600,000)	(700,000)
Long-term liabilities	(500,000)	(400,000)

At December 31, 2015, Hayden reports the following US$ balance sheet information:

Book Value $	Fair Value $
Current Assets	800,000	400,000
Noncurrent Assets (excluding Goodwill)	1,500,000	1,100,000
Current liabilities	(700,000)	(700,000)
Long-term liabilities	(500,000)	(400,000)

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:

December 31, 2016	December 31, 2017	December 31, 2018	December 31, 2019	December 31, 2020
$265,000	$265,000	$265,000	$265,000	$265,000

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.