Question

On January 1, Year 1, East Company purchased $60,000 of goodwill. On December 31, Year 4 East determined that the goodwill suffered a $25,000 permanent impairment. However, on December 31, Year 6 East estimated that it had recovered $5,000 of the impairment that had previously been considered to be a permanent impairment. Which of the following journal entries was required to recognize the impairment?

Multiple Choice Credit Account Titles Loss on Impairment Goodwill Debit 25,000 25,000 Credit Account Titles Loss on Impairment Goodwill Debit 20,000 20,000 Account Titles Goodwill Loss on Impairment Debit 25,000 Credit 25,000 Credit Account Titles Goodwill Gain on Impairment Recovery Debit 5,000 5,800

Answer 1

ANSWER:

OPTION:

Account titles	debit	credit
Loss on impairment Goodwill	$25000 .	. $25000

EXPLANATION:

The above journal entry shall be passed which recognizes the permanent loss on account of impairment. The reversal of impairment on account of recovery is not allowed.