Exercise 11–30
Requirement 1
Determination of implied fair value of goodwill:
Fair value of Centerpoint, Inc. $220 million
Measurement of impairment loss:
Book value of goodwill $50 million
Requirement 2
Exercise 11–31
Under IFRS, the impairment loss is the difference between book value and the
recoverable amount of the cash-generating unit. The recoverable amount is $225
million, the higher of the $225 million value-in-use (present value of estimated
future cash flows) and the $220 million fair value less costs to sell.
Book value $250 million
Exercise 11–32
Requirement 1
Calculation of goodwill:
Consideration exchanged $420 million
Less fair value of net assets:
Requirement 2
Recoverability test:
Because the book value of the net assets ($410 million) exceeds fair value
Measurement:
Determination of implied fair value of goodwill:
Fair value of Harman, Inc. $400 million
Measurement of impairment loss:
Requirement 3
Entry to record the impairment loss:
($ in millions)
Exercise 11–33
Requirement 1
The Codification topic number that provides guidance on accounting for the
Requirement 2
The specific citation that discusses the disclosures required in the notes to the
Requirement 3
All of the following information shall be disclosed in the notes to financial
statements that include the period in which an impairment loss is recognized:
a. A description of the impaired long-lived asset (asset group) and the facts
b. If not separately presented on the face of the statement, the amount of the
c. The method or methods for determining fair value (whether based on a
Exercise 11–34
The FASB Accounting Standards Codification® represents the single
source of authoritative U.S. generally accepted accounting principles.
The specific citation for each of the following items is:
1. Depreciation involves a systematic and rational allocation of cost
rather than a process of valuation:
FASB ASC 360–10–35–4: “Property, Plant, and Equipment–Overall–
Subsequent Measurement–Depreciation.”
The cost of a productive facility is one of the costs of the services it
renders during its useful economic life. Generally accepted accounting
2. The calculation of an impairment loss for property, plant, and
equipment:
FASB ASC 360–10–35–17: “Property, Plant, and
Equipment–Overall–
Subsequent Measurement.”
An impairment loss shall be recognized only if the carrying amount
(book value) of a long-lived asset (asset group) is not recoverable and
Exercise 11–34 (concluded)
3. Accounting for a change in depreciation method:
FASB ASC 250–10–45–18: “Accounting Changes and Error
Correction–Overall–Other Presentation Matters.”
Distinguishing between a change in an accounting principle and a
change in an accounting estimate is sometimes difficult. In some
cases, a change in accounting estimate is effected by a change in
4. Goodwill should not be amortized:
FASB ASC 350–20–35–1: “Intangibles-Goodwill and
Other–Goodwill–
Exercise 11–35
1. To record the replacement of the heating system.
……………………………………………………………………..Cash
2. To record the addition to the building.
……………………………………………………………………..Cash
3. To expense annual maintenance costs.
……………………………………………………………………..Cash
4. To capitalize rearrangement costs.
……………………………………………………………………..Cash
Exercise 11–36
Requirement 1
Requirement 2
Requirement 3
Calculation of revised annual amortization:
Amortization to date (above)
Unamortized cost (balance in the patent account)
Requirement 4
Requirement 2:
Requirement 3:
Exercise 11–37
List A List B
g 1. Depreciation a. Cost allocation for natural resource.
d 2. Service life b. Accounted for prospectively.
f 3. Depreciable base c. When there has been a significant
decline in value.
e 4. Activity-based methodd. The amount of use expected from
plant and equipment and finite-life
intangible assets.
Exercise 11–38
Requirement 1
To record the acquisition of small tools.
2016
……………………………………………………………………..Cash
To record additional small tool acquisitions.
2018
……………………………………………………………………..Cash
To record the sale/depreciation of small tools.
2018
…………………………………………………………….Small tools
Exercise 11–38 (concluded)
Requirement 2
To record the acquisition of small tools.
2016
……………………………………………………………………..Cash
To record the replacement/depreciation of small tools.
2018
……………………………………………………………………..Cash
To record the sale of small tools.
2018
………………………………………………Depreciation expense