On May 31, 2021, Sunland Company paid
$3,780,000 to acquire all of the common stock of Carla
Vista Corporation, which became a division
of Sunland. Carla Vista reported the following
balance sheet at the time of the acquisition:
Current assets
$ 972,000
Current liabilities
$ 648,000
Noncurrent assets
2,916,000
Long-term liabilities
540,000
Stockholder's equity
2,700,000
Total assets
$3,888,000
Total liabilities and
stockholder's equity
$3,888,000
It was determined at the date of the purchase that the fair value
of the identifiable net assets of Carla Vista was
$3,348,000. At December 31, 2021, Carla Vista reports the
following balance sheet information:
Current assets
$ 864,000
Noncurrent assets (including goodwill recognized in
purchase)
2,592,000
Current liabilities
(756,000
)
Long-term liabilities
(540,000
)
Net assets
$2,160,000
It is determined that the fair value of the Carla
Vista division is $2,376,000.
Part 1
Compute the amount of goodwill recognized, if any, on May 31,
2021.
Amount of goodwill
$
Part 2
Determine the impairment loss, if any, to be recorded on
December 31, 2021.
Impairment loss
$
Part 3
Assume that the fair value of the Carla Vista division
is $2,106,000 instead of $2,376,000. Prepare the journal entry
to record the impairment loss, if any, on December 31,
2021. (If no entry is required, select "No Entry"
for the account titles and enter 0 for the amounts. Credit account
titles are automatically indented when the amount is entered. Do
not indent manually.)
Account Titles and Explanation
Debit
Credit