Alfonso Inc. acquired 100 percent of the voting shares of BelAire Company on January 1, 2020. In exchange. Alfonso paid $237.750 in cash and issued 100,000 shares of its own $1 par value common stock. On this date. Alfonso's stock had a fair value of $15 per share. The combination is a statutory merger with BelAire subsequently dissolved as a legal corporation. BelAire's assets and liabilities are assigned to a new reporting unit. The following shows fair values for the BelAire reporting unit for January 1, 2020 along with respective carrying amounts on December 31, 2021. BelAire Reporting Unit Cash Receivables Inventory Patents Customer relationships Equipment (net) Goodwill Accounts payable Long-term liabilities. Note: Parentheses indicate a credit balance. Fair Values 1/1/20 71,000 182,750 218,000 $ 519,000 621,500 329,500 ? (105,500) (684,500) Carrying Amounts 12/31/21 42,000 237,000 252,000 616,000 592,000 273,000 $ 586,000 (186,000) (588,000) a. Prepare Alfonso's journal entry to record the assets acquired and the liabilities assumed in the BelAire merger on January 1, 2020. Note: Enter cash paid and cash received as two separate amounts. b. On December 31, 2021, Alfonso opts to forgo any goodwill impairment qualitative assessment and estimates that the total fair value of the entire BelAire reporting unit is $1,640,000. What amount of goodwill impairment, if any, should Alfonso recognize on its 2021 income statement?
Alfonso Inc. acquired 100 percent of the voting shares of BelAire Company on January 1, 2020. In exchange. Alfonso paid $237.750 in cash and issued 100,000 shares of its own $1 par value common stock. On this date. Alfonso's stock had a fair value of $15 per share. The combination is a statutory merger with BelAire subsequently dissolved as a legal corporation. BelAire's assets and liabilities are assigned to a new reporting unit. The following shows fair values for the BelAire reporting unit for January 1, 2020 along with respective carrying amounts on December 31, 2021. BelAire Reporting Unit Cash Receivables Inventory Patents Customer relationships Equipment (net) Goodwill Accounts payable Long-term liabilities. Note: Parentheses indicate a credit balance. Fair Values 1/1/20 71,000 182,750 218,000 $ 519,000 621,500 329,500 ? (105,500) (684,500) Carrying Amounts 12/31/21 42,000 237,000 252,000 616,000 592,000 273,000 $ 586,000 (186,000) (588,000) a. Prepare Alfonso's journal entry to record the assets acquired and the liabilities assumed in the BelAire merger on January 1, 2020. Note: Enter cash paid and cash received as two separate amounts. b. On December 31, 2021, Alfonso opts to forgo any goodwill impairment qualitative assessment and estimates that the total fair value of the entire BelAire reporting unit is $1,640,000. What amount of goodwill impairment, if any, should Alfonso recognize on its 2021 income statement?
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter12: Intangibles
Section: Chapter Questions
Problem 18E
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Transcribed Image Text:Alfonso Inc. acquired 100 percent of the voting shares of BelAire Company on January 1, 2020. In exchange, Alfonso paid $237.750 in
cash and issued 100,000 shares of its own $1 par value common stock. On this date. Alfonso's stock had a fair value of $15 per share.
The combination is a statutory merger with BelAire subsequently dissolved as a legal corporation. BelAire's assets and liabilities are
assigned to a new reporting unit.
The following shows fair values for the BelAire reporting unit for January 1, 2020 along with respective carrying amounts on December
31, 2021.
A
BelAire Reporting Unit
Cash
Receivables
Inventory
Patents
Customer relationships.
Equipment (net)
Goodwill
Accounts payable
Long-term liabilities.
Note: Parentheses indicate a credit balance.
Fair Values
1/1/20
$
71,000
182,750
218,000
519,000
621,500
329,500
?
(105,500)
(684,500)
Carrying Amounts
12/31/21
42,000
$
237,000
252,000
616,000
592,000
273,000
586,000
(186,000)
(588,000)
a. Prepare Alfonso's journal entry to record the assets acquired and the liabilities assumed in the BelAire merger on January 1, 2020.
Note: Enter cash paid and cash received as two separate amounts.
b. On December 31, 2021, Alfonso opts to forgo any goodwill impairment qualitative assessment and estimates that the total fair value
of the entire BelAire reporting unit is $1,640,000. What amount of goodwill impairment, if any, should Alfonso recognize on its 2021
income statement?
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