Fleming Corporation acquired Out-of-Sight Products on January 1, 2008 for $4,000,000, and recorded goodwill of $750,000 as a result of that purchase.At December 31, 2008, the Out-of-Sight Products Division had a fair value of $3,400,000.The net identifiable assets of the Division (excluding goodwill) had a fair value of $2,900,000 at that time.What amount of loss on impairment of goodwill should Fleming record in 2008?
A)$ -0-
B)$250,000
C)$350,000
D)$600,000

Question

Quizplus · Accepted Answer

The loss on impairment of goodwill is calculated as the difference between the carrying amount of goodwill and its implied fair value. In this case, the carrying amount of goodwill is $750,000 and the implied fair value is $500,000 ($3,400,000 fair value of the division - $2,900,000 fair value of identifiable net assets). Therefore, the loss on impairment of goodwill is $250,000.

Fleming Corporation Acquired Out-Of-Sight Products on January 1, 2008 for $4,000,000