On May 1, 2011, Walker Company (a US company) paid US$4,500,000

On May 1, 2011, Walker Company (a US company) paid US$4,500,000

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Question 1 On May 1, 2011, Walker Company (a US company) paid US$4,500,000 to acquire all of the common stock of Hayden Corporation

Question 1

On May 1, 2011, Walker Company (a US companypaid US$4,500,000 to acquire all of the commonstock of Hayden Corporation (an Australian company), which now became a division of WalkerHaydenreported the following US$ balance sheet at the time of the acquisition:

                                              Book Value $                     Fair Value $

Current Assets                 900,000                                1,500,000

Noncurrent Assets         2,700,000                            2,300,000

Current liabilities             (600,000)                            (700,000)

Long-term liabilities        (500,000)                            (400,000)

 

At December 31, 2011, Hayden reports the following US$ balance sheet information:

Book Value $                     Fair Value $

Current Assets                 700,000                                800,000

Noncurrent Assets          1,200,000                            1,300,000

(excluding Goodwill)

 

Current liabilities             (600,000)                            (700,000)

Long-term liabilities        (500,000)                            (400,000)

 

During the annual impairment test conducted on December 31, 2011, it was determined that the fairvalue of the Hayden division as a whole was $2,800,000.

Required:

(a)   Compute the amount of goodwill recognizedif anyon May 1, 2011.              

(b)  Determine the impairment lossif anyto be recorded on December 31, 2011.      

(c)   Determine the implied fair value of goodwill on December 31, 2011.                       

(d)  On the assumption that the fair value of Hayden on December 31, 2011 was $1,950,000 instead of$2,800,000, determine the impairment lossif anyto be recorded.


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