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Wolf Pack Transport Co. has a 25 percent equity investment in Maggie Valley Depot (MVD), Inc., which owns and operates a warehousing facility used for the collection and redistribution of various consumer goods. Wolf Pack paid $1,685,000 for its 25 percent interest in MVD several years ago, including a $300,000 allocation for goodwill as the only excess cost over book value acquired. Wolf Pack Transport has since appropriately applied the equity method to account for the investment. In its most recent balance sheet, because of recognized profits in excess of dividends since the acquisition, Wolf Pack reported a $2,350,000 amount for its Investment in Maggie Valley Depot, Inc., account.
Required
Problem 1. What guidance does the FASB ASC provide for equity method investment losses in value?
Problem 2. Should Wolf Pack recognize the decline in the value of its holdings in MVD in its current year financial statements?
Problem 3. Should Wolf Pack test for impairment of the value it had initially assigned to goodwill?
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