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25 April, 18:24

General Products Company bought Special Products Division in 2014 and appropriately recorded $750,000 of goodwill related to the purchase. On December 31, 2015, the fair value of Special Products Division is $6,000,000 and it is carried on General Product's books for a total of $5,100,000, including the goodwill. An analysis of Special Products Division's assets indicates that goodwill of $600,000 exists on December 31, 2015. What goodwill impairment should be recognized by General Products in 2015?

a. $75,000.

b. $300,000.

c. $450,000.

d. $0.

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  1. 25 April, 18:49
    0
    D

    Explanation:

    Excess goodwill = Actual value - Existing value = 750,000 - 600,000 = 150,000

    Amount to be recognized = [Value recorded - Existing value]/[Fair value - Total value] = [750,000 - 600,000]/[6,000,000 - 5,100,000] = 150,000/900,000 = 0.16 which is close to 0

    Therefore, goodwill impairment that should be recognized by General Products in 2015 is 0
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