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Jones Company bought Wood Company in 2020 and appropriately recorded $750,000 of goodwill related to the purchase. On December 31, 2021, the fair value of Wood Company is $6,000,000 and it is carried on Jones' books for a total of $5,100,000, including the goodwill. What goodwill impairment should be recognized by Jones in 2021?

Respuesta :

Parrain

Answer: $0

Explanation:

Wood company's value is carried in Jones company books as $5,100,000 which is less than the fair value of $6,000,000. There is therefore no goodwill because the fair value is larger than the carrying value and goodwill only exists if the reverse is the case.

If there is no goodwill, there can be no goodwill impairment so goodwill impairment recognized in 2021 is $0.

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