Reference no: EM133050157

Question - Alfonso Inc. acquired 100 percent of the voting shares of BelAire Company on January 1, 2020. In exchange, Alfonso paid $382,500 in cash and issued 100,000 shares of its own $1 par value common stock. On this date, Alfonso's stock had a fair value of $15 per share. The combination is a statutory merger with BelAire subsequently dissolved as a legal corporation. BelAire's assets and liabilities are assigned to a new reporting unit.

The following shows fair values for the BelAire reporting unit for January 1, 2020 along with respective carrying amounts on December 31, 2021.

BelAire Reporting Unit	Fair Values 1/1/20	Carrying Amounts 12/31/21
Cash	$83,000	$46,000
Receivables	197,500	241,000
Inventory	230,500	256,000
Patents	677,000	757,000
Customer relationships	545,500	520,000
Equipment (net)	395,000	339,000
Goodwill	?	514,000
Accounts payable	(171,500)	(266,000)
Long-term liabilities	(588,500)	(498,000)

Required -

a. Prepare Alfonso's journal entry to record the assets acquired and the liabilities assumed in the BelAire merger on January 1, 2020.

b. On December 31, 2021, Alfonso opts to forgo any goodwill impairment qualitative assessment and estimates that the total fair value of the entire BelAire reporting unit is $1,680,000. What amount of goodwill impairment, if any, should Alfonso recognize on it 2021 income statement?