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Explain the concept of a cash generating unit

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Question - On September 1, 2020, Peter Corporation acquired Darcy Enterprises for a cash payment of $850,000. At the time of purchase, Darcy's statement of financial position showed assets of $ 890,000, liabilities of $450,000, and owner's equity of $440,000. The fair value of Darcy's assets is estimated to be $1,150,000. Assume that Peter is a public company and the goodwill was allocated entirely to one cash-generating unit (CGU). Two years later, the CGU's carrying amount is $3,450,000; its value in use is $3,380,000; the fair value less costs to sell is $2,980,000.

Required -

1. Determine if goodwill is impaired, and calculate the goodwill impairment loss.

2. Record the journal entry for the impairment, if necessary. If not necessary, state that no journal entry is necessary.

3. Explain the concept of a 'cash generating unit'.

Reference no: EM132560776

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