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5. On July 12, 2017, Browning Corporation acquired Smith Company in a business combination. As a...

5. On July 12, 2017, Browning Corporation acquired Smith Company in a business combination. As a result of the combination, the following amounts of goodwill were recorded for each of the three reporting units of the acquired company. Retailing $60,000 Service $40,000 Financing $80,000 Near the end of 2017 a new major competitor entered the company's market and Browning was concerned that this might cause a significant decline in the value of goodwill. Accordingly, Browning computed the implied value of the goodwill for the three major reporting units at December 31, 2017 as follows: Retailing $50,000 Service $20,000 Financing $120,000 Required: Determine the amount of impairment of goodwill that should be recorded by Carver at December 31, 2017.

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Impairment cost is always charged when carrying value of asset significantly exceeds its fair value.When the acquirer company pays the target company goodwill more than its book value of the assets and subsequently the asset values declined.

Goodwill Impairment is recorded as follows:

Loss on Goodwill Impairment a/c          Dr.

              To Goodwill

Therefore Goodwill impairment for Retailing = $60000 - $50000 = $10000

Goodwill impairment for Service = $40000 - $20000 = $20000

Total = $10000 + $20000 = $30000

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