Potter owned a 100% subsidiary, Hogwart that is treated as a cash generating unit. On 31 December 2016, there was an industrial accident (a gas explosion) that caused damage to some of Hogwart's plant. The assets of Hogwart immediately before the accident were: £'000 Goodwill 1,800 1,200 4,000 3,500 1,500 12,000 Patent Factory building Plant Receivables and cash As a result of the accident, the recoverable amount of the assets held by Hogwart is £6.7 million.
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- On May 1, 2015, Zoe Inc. purchased Branta Corp. for $15,000,000 in cash. They only received $12,000,000 in net assets. In 2016, the market value of the goodwill obtained from Branta Corp. was valued at $4,000,000, but in 2017 it dropped to $2,000,000. Prepare the journal entry for the creation of goodwill and the entry to record any impairments to it in subsequent years.In 2015, Bambung Corporation acquired production machinery at a cost of £416,000, which now has a book value of £195,000. The discounted future cash flows from use of the machinery is £175,000 and its fair value less costs to sell is £159,000. What amount should Bambung recognize as a loss on impairment under IFRS? Group of answer choices £16,000 £36,000 -0- £20,000Eastern Management Ltd acquired all the assets and liabilities of King Ltd on 30 June 2017. The carrying amount and estimated fair value of assets and liabilities of King Ltd to be taken over are as follows: Carrying amount Fair value Accounts Receivable $760,000 $720,000 Inventory $1,300,000 $1,440,000 Property, plants and equipment $1,680,000 $1,560,000 Accounts payables $680,000 $680,000 Provision for employees benefits $170,000 $220,000 In addition to these assets and liabilities, due diligence identified the existence of brand names that were valued by an expert at $500,000. The due diligence process also uncovered contingent liabilities that were reliably measured at $150,000. The price paid was $4.8 million and costs of $100,000 were incurred in the purchase. Required: Calculate the amount of goodwill that would be recorded in the books of Eastern Management Ltd following the acquisition of King Ltd. Show all workings. How…
- Impairment of a CGU (Cash Generating Unit) Potters Ltd has determined that its fine china division is a CGU. The carrying amounts of the assets at 30 June 2016 are as follows: Factory $210 000 Land 150 000 Equipment 120 000 Inventories 60 000 Potters Ltd calculated the value in use of the division to be $510 000. Required: Provide the necessary journal entries for the impairment loss. Answer: POTTERS LTD If recoverable amount is xxx, then there is an impairment loss of xxx. Assuming the inventory is carried at the lower of costs and net realisable value, the allocation of the impairment loss is as follows: Carrying Proportion Allocation Net Carrying Amount of Loss Amount…The following information is available relating to a cash generating unit belonging to Bliss plc: £m Building 60 Plant and Equipment 12 Goodwill 20 Current Assets 40 132 Following an industrial accident, it has been determined that the recoverable amount of the cash generating unit to be £100m. The current assets are already at their recoverable amount. Determine the impairment loss relating to this Cash Generating Unit. Allocate the impairment loss to the cash generating unit, and show the value of each of the assets listed above once the impairment loss has been allocated.On September 3, 2018, the Robers Company exchanged equipment with Phifer Corporation. The facts of theexchange are as follows:Robers’ Asset Phifer’s AssetOriginal cost $120,000 $140,000Accumulated depreciation 55,000 63,000Fair value 75,000 70,000To equalize the exchange, Phifer paid Robers $5,000 in cash.Required:Record the exchange for both Robers and Phifer. The exchange has commercial substance for both companies.
- S Company had the following balances at the time it was acquired by P Company:Cash P36,000Accounts receivable 457,000Inventories 120,000Property, plant and equipment 696,400Goodwill 200,000Accounts payable 350,800P Company paid P1.4M for the net assets of S Company. It was determined that fair market values of inventories and property, plant and equipment were P133,000 and P900,000, respectively.An assumed contingent liability with a fair value amounting to P20,000 and such amount is considered a reliable measurement. Also, a P50,000 future losses or reorganization/ restructuring costs are expected to be incurred as a result of the business combination.In the books of P Company, how will be the amount of Goodwill arising from business combination?F Corporation sold equipment to its 80% owned subsidiary, R Corp., on January 1, 2016. F sold the equipment for P110,000 when its book value was P85,000 and it had a 5-year remaining useful life with no expected salvage value. Separate balance sheets for F and R included the following equipment and accumulated depreciation amounts on December 31, 2016. F R Equipment 750,000 300,000 Accumulated Depreciation (200,000) (50,000) Equipment – net 550,000 250,000 What is the consolidated amounts for equipment and accumulated depreciation at December 31, 2016, respectively? Group of answer choices 1,025,000 and 250,000 1,050,000 and 245,000 1,050,000 and 250,000 1,025,000 and 245,000Akron, Inc., owns all outstanding stock of Toledo Corporation. Amortization expense of $15,000 per year for patented technology resulted from the original acquisition. For 2018, the companies had the following account balances: Akron ToledoSales . . . . . . .. $1,100,000 $600,000Cost of goods sold 500,000 400,000Operating expenses 400,000 220,000Investment income . . Not given –0–Dividends declared . . .80,000 30,000 Intra-entity sales of $320,000 occurred during 2017 and again in 2018. This merchandise cost $240,000 each year. Of the total transfers, $70,000 was still held on December 31, 2017, with $50,000 unsold on December 31, 2018.a. For consolidation purposes, does the direction of the transfers (upstream or downstream) affect the balances to be reported here?b. Prepare a consolidated income statement for the year ending December 31, 2018.
- In January 1, 2015, Fun company purchased Company A for $40,000 in cash and paid immediately. Fun company assumed all of Company A's assets and assumed Company A's liabilities. company A has assets valued at $60,000 and liabilities valued at $50,000. Question 2: in 2016, fun company must test for the impairment of goodwill. Assume the only goodwill on fun company's books is from the acquisition of company A. Fun company determined that the goodwill has an estimated future cash flow of $25,000 and a fair market value of $20,000. Does fun company have to recognize an impairment? Why or why not? If an impairment must be recognized, compute the impairment loss and record the journal entry. ACTUAL QUESTION: suppose that the estimated future cash flow of goodwill in question #2 is $32,000, while the fair market value continues to be $20,000. Does fun company have to recognize an impairment? Why or why not? If an impairment must be recognized, compute the impairment loss and record the…Wember Company acquired a subsidiary company on December 31, 2015, and recorded the cost of the intangible assets it acquired as follows: Patent $80,000 Trade name 100,000 Goodwill 250,000 The patent is being amortized by the straight-line method over an expected life of 10 years with no residual value. Amortization has been recorded for the current year. The trade name was considered to have an indefinite life. Because of the success of the subsidiary in the past, Wember has not previously considered any of the intangible assets to be impaired. However, in 2019, because of a current recession and technological changes in the subsidiary’s industry, Wember decides to review all of its intangible assets for impairment and record any adjustments at December 31, 2019. Wember estimates that the fair value of the patent is $42,000. The company estimates the fair value of the trade name to be $120,000 but decides that it now has a limited life of 6 years. The subsidiary…Wember Company acquired a subsidiary company on December 31, 2015, and recorded the cost of the intangible assets it acquired as follows: Patent $80,000 Trade name 100,000 Goodwill 250,000 The patent is being amortized by the straight-line method over an expected life of 10 years with no residual value. Amortization has been recorded for the current year. The trade name was considered to have an indefinite life. Because of the success of the subsidiary in the past, Wember has not previously considered any of the intangible assets to be impaired. However, in 2019, because of a current recession and technological changes in the subsidiary’s industry, Wember decides to review all of its intangible assets for impairment and record any adjustments at December 31, 2019. Wember estimates that the fair value of the patent is $42,000. The company estimates the fair value of the trade name to be $120,000 but decides that it now has a limited life of 6 years. The subsidiary…