Reference no: EM133012638

On May 31, 2011, Armstrong Company paid P3,500,000 to acquire all of the common stock of Hall Corporation, which became a division of Armstrong. Hall reported the following balance sheet at the time of the acquisition:

Current assets P900,000                   Current liabilities P600,000
Noncurrent assets 2,700,000               Long-term liabilities 500,000
Stockholders' equity 2,500,000
                                                          Total liabilities and
Total assets P3,600,000                       stockholders' equity P3,600,000

It was determined at the date of the purchase that the fair value of the identifiable net assets of Hall was P2,800,000. At December 31, 2011, Hall reports the following balance sheet information:

Current assets P800,000
Noncurrent assets (including goodwill
recognized in purchase) 2,400,000
Current liabilities (700,000)
Long-term liabilities (500,000)
Net assets P2,000,000

It is determined that the fair market value of the Hall division is P2,100,000. The recorded amount for Hall's net assets (excluding goodwill) is the same as fair value, except for property, plant, and equipment, which has a fair value of P200,000 above the carrying value.

Required:

Problem 1. The amount of goodwill recognized, if any, on May 31, 2011.

Problem 2. The impairment loss, if any, to be recorded on December 31, 2011.

Problem 3. Assume that the fair value of the Hall division is P1,900,000 instead of P2,100,000. Prepare the journal entry to record the impairment loss, if any, on December 31, 2011.