On 31st july 2012 mexico company paid 3000000 to get all of

Assignment Help Financial Accounting

Reference no: EM13351820

On 31^st July, 2012, Mexico Company paid $3,000,000 to get all of the common stock of Conchita Inc., which became a division of Mexico. Conchita reported the subsequent balance sheet at the time of the acquisition.

Current Assets $800,000 Current Liabilities: $600,000

Noncurrent Assets $2,700,000 Long Term Liabilities: $500,000

Total Assets: $3,500,000 Stockholders Equity: $2,400,000

Total Liabilities and Equity: $3,500,000

It was evaluated at the date of the purchase that the fair value of the identifiable total assets of Conchita was $2,750,000. Over the next 6 months of operations, the recently purchased division experienced operating losses. In addition, it now seems that it will generate substantial losses for the foreseeable future. At 31^st December,2012, Conchita reports the subsequent balance sheet information.

Current Assets: $450,000

Noncurrent Assets: $2,400,000

Current Liabilities: ($700,000)

Long Term Liabilites: ($500,000)

Net Assets: $1,650,000

It is evaluated that the fair value of the Conchita Division is $1,850,000. The recorded amount for Conchita's net assets (excluding goodwill) is the same as the fair value, except for property, equipment, and plant which has a fair value $150,000 above the carrying value.

(a) Evaluate the amount of goowill recognized, if any, on 31^st July, 2012.

(b) Evaluate the impairment loss, if any, to be recorded on 31^st December, 2012.

(c) Consider that fair value of the Conchita Division is $1,600,000 instead of $1,850,000. Evaluate the impariment loss, if any, to be recorded on 31^st December, 2012.

(d) Purpose the journal entry to record the impairment loss, if any, and show where the loss would be reported in the income statement.

Reference no: EM13351820

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