Destin Corporation acquired Beltran Corporation on January 1, 2014, at a cost of $75 million. Beltran consisted of three identifiable reporting units, designated X, Y and Z. Relevant data for the acqu

Destin Corporation acquired Beltran Corporation on January 1, 2014, at a cost of $75 million. Beltran consisted of three identifiable reporting units, designated X, Y and Z. Relevant data for the acquisition are as follows:

Total Unit x Unit y Unit

Identifiable 60,000,000 32,000,000 20,000,000 8,000,000

Liabilities 25,000,000 18,000,000 6,000,000 1,000,000

Fair Value of reporting unit 50,000,000 30,000,000 15,000,000

In addition, existing reporting unit J is expected to benefit from the acquisition, such that its fair value increases by $20,000,000. Unit J has a carrying value of $70,000,000.

Assume qualitative assessment at December 31, 2014, indicates it is more likely than not that book value exceeds fair value for all reporting units, and Destin proceeds with the qualitatively test of goodwill impairment. On December 31, 2014, the following amounts were estimated for the four reporting units:

Unit x Unit y Unit z Unit j

Fair value of reporting unit 30,000,000 15,000,000 12,000,000 75,000,000

Fair value of indentifiable net assets 23,000,000 6,000,000 4,000,000 58,000,000

Book value 34,000,000 20,000,000 10,000,000 72,000,000

Required:

1. Calculate the total goodwill and its allocation to business units at January 1, 2014

2. Calculate any impairment of goodwill at December 31, 2014

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Destin Corporation acquired Beltran Corporation on January 1, 2014, at a cost of $75 million.
Beltran consisted of three identifiable reporting units, designated X, Y and Z. Relevant data for
the acquisition are as follows:
Total
Unit x
Unit y
Unit
Identifiable
60,000,000
32,000,000
20,000,000
8,000,000
Liabilities
25,000,000
18,000,000
6,000,000
1,000,000
Fair Value of
reporting unit
50,000,000
30,000,000
15,000,000
In addition, existing reporting unit J is expected to benefit from the acquisition, such that its fair value
increases by $20,000,000. Unit J has a carrying value of $70,000,000.
Assume qualitative assessment at December 31, 2014, indicates it is more likely than not that
book value exceeds fair value for all reporting units, and Destin proceeds with the qualitatively
test of goodwill impairment. On December 31, 2014, the following amounts were estimated for
the four reporting units:
Unit x
Unit y
Unit z
Unit j
Fair value of
reporting unit
30,000,000
15,000,000
12,000,000
75,000,000
Fair value of
indentifiable net
assets
23,000,000
6,000,000
4,000,000
58,000,000
Book value
34,000,000
20,000,000
10,000,000
72,000,000
Required:
1. Calculate the total goodwill and its allocation to business units at January 1, 2014 (3 points)
2. Calculate any impairment of goodwill at December 31, 2014. (7 points)

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