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1. (a) Bridge to the Profession: Professional R...

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1. (a) Bridge to the Profession: Professional Research: FASB Codification, (b) On May 31, 2011, Armstrong Company (A US company) paid US$3,700,000 to acquire all of the common stock of Hall Corporation (a German company), which now became a division of Armstrong. Hall reported the following US$ balance sheet at the time of the acquisition: Current assets $ 900,000 Noncurrent assets 2,700,000 Total asset 3600000 current liabilities $ 600000 long-term liabilities 500000 stockholders equity 2500000 Total liabilities and stockholders equity 3600000 It was determined at the date of purchase that the fair value of the identifiable net assets of Hall was US$2,800,000. At December 31, 2011, Hall reports the following US$ balance sheet information: Current assets $ 800,000 Noncurrent assets (including goodwill recognized in purchase) 2,400,000 Current liabilities (700,000) Long-term liabilities (500,000) Net assets $2,000,000 It is determined that the future significant net cash flows of the Hall division will be US$300,000 per year for the next 20 years, occurring at year-end (Hint: the present value of future cash flows can be used as a proxy for the fair value). The recorded amount for Hall?s net assets (excluding goodwill) is the same as fair value, except for property which has a fair value of US$200,000 above the carrying value. The appropriate discount rate for Armstrong is 15%, while that for the Hall division is 10%. Required: i. Compute the amount of goodwill recognized, if any, on May 31, 2011. (5 points) ii. Determine the impairment loss, if any, to be recorded on December 31, 2011. (6 points) iii. On the assumption that the appropriate discount rate for Hall is the same as that for Armstrong, determine the impairment loss, if any, to be recorded on December 31, 2011. (17 points) iv. Prepare the journal entry to record the impairment loss, if any, on December 31, 2011. (2 points) (Points : 50)

 

Paper#6503 | Written in 18-Jul-2015

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