[calicpa]

Is the answer 0? Not sure what to think because the statement in the solution is false.

Step one indicates that the carrying value ($4,000) is less than the market value ($3,200), so step two must be completed.

This is an error. Is the answer A, or is it still D?

BTW, this is another error in a solution from CPAexcel… they have SO many errors in their textbooks and solutions its ridiculous. (sorry Jeff, forgot to classify)

Firm A purchased Firm B for $4,000 when B’s total owners’ equity was $2,000. Firm A completed the qualitative test for goodwill impairment and determined that it is more likely than not that goodwill may be impaired. B had one asset worth $500 more than the book value. One year after the purchase, Firm B’s total market value had dropped to $3,200 and the market value of its net identifiable assets was $2,000. What amount of goodwill impairment loss is recorded?

A. $0

B. $800

C. $400

D. $300

A is Incorrect…

The qualitative pre-step indicates the possibility that goodwill is impaired; therefore, the quantitative goodwill impairment test must be completed. Step one indicates that the carrying value ($4,000) is less than the market value ($3,200), so step two must be completed. Step two measures the potential impairment loss. The implied goodwill is the market value of the reporting unit ($3,200) less the market value of the net identifiable assets ($2,000) or $1,200. The recorded goodwill is $1,500 (purchase price $4,000-fair market value of net assets $2,500). The goodwill impairment loss is the implied goodwill ($1,200) less the recorded goodwill ($1,500) or $300.

BEC - 84, 4/6/13
AUD - 77, 5/28/13
REG - 83, 4/12/14
FAR - 83, 10/3/13

Ethics - 90% 4/24/13

150 unit education requirement met!
Work experience met!

[Whopper Warrior]

The Answer is Still D

Step One:

Value of Investment: 4,000

FMV: 3,200

Step Two:

Carrying Value: 1,500 (4,000 purchase price – 2,000 equity – 500 appreciated asset)

Implied Value: 1,200 (3,200 FMV – 2,000 identifiable assets)

Impairment 300

The solution should read more than, not less than.

ALL 4 parts passed summer 13
Ethics October 13
Experience (waiting)

Becker Only

[Whopper Warrior]

The Answer is Still D

Step One:

Value of Investment: 4,000

FMV: 3,200

Step Two:

Carrying Value: 1,500 (4,000 purchase price – 2,000 equity – 500 appreciated asset)

Implied Value: 1,200 (3,200 FMV – 2,000 identifiable assets)

Impairment 300

The solution should read more than, not less than.

ALL 4 parts passed summer 13
Ethics October 13
Experience (waiting)

Becker Only

[Author]

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