Orioles Company bought Special Products Division in 2017 and appropriately recorded $741,000 of goodwill related to the purchase. On December 31, 2018, the fair value of Special Products Division is $5,600,000 and it is carried on Oriole's books for a total of $4,700,000, including the goodwill. An analysis of Special Products Division's assets indicates that goodwill of $595,000 exists on December 31, 2018. What goodwill impairment should be recognized by Orioles in 2018?

Question

Business

Rodgers

21 October, 02:26

Orioles Company bought Special Products Division in 2017 and appropriately recorded $741,000 of goodwill related to the purchase. On December 31, 2018, the fair value of Special Products Division is $5,600,000 and it is carried on Oriole's books for a total of $4,700,000, including the goodwill. An analysis of Special Products Division's assets indicates that goodwill of $595,000 exists on December 31, 2018. What goodwill impairment should be recognized by Orioles in 2018?

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Answers (1)

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Patrick Blake · Answer 1

No goodwill impairment should be recognized by Orioles in 2018

Explanation:

Data provided in the question:

Goodwill related to the purchase = $741,000

Fair value of Special Products Division = $5,600,000

Goodwill existing on December 31, 2018 = $595,000

Now,

Here, the fair value of division including the goodwill i. e $5,600,000 is lower than the fair value of division excluding the goodwill i. e $595,000

Hence,

There will be impairment loss

Hence,

No goodwill impairment should be recognized by Orioles in 2018