Regular Corp. has four divisions. One of them, Weeble Products, was acquired on January 1, 2016, for $80,000,000, and recorded goodwill of $7,000,000 as a result of that purchase. Weeble Products is considered to be a reporting unit. At December 31, 2017, Weeble Products had a fair value (including goodwill) of $38,000,000, and the book value of the division's net assets (including goodwill) was $46,000,000. What amount of loss on impairment of goodwill should Regular record in 2017?
A) -0-
B) $7,000,000
C) $8,000,000
D) $15,000,000

Question

Quizplus · Accepted Answer

The impairment loss is calculated as the difference between the book value and the fair value of the reporting unit. The book value is $46,000,000, and the fair value is $38,000,000, resulting in an impairment loss of $8,000,000. However, since the goodwill recorded was $7,000,000, the impairment loss is limited to the amount of goodwill, which is $7,000,000.