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Question: On July 1, 2017, Zoe Corporation purchased

On July 1, 2017, Zoe Corporation purchased the net assets of Soorya Company by paying $415,000 cash and issuing a $50,000 note payable to Soorya Company. At July 1, 2017, the statement of financial position of Soorya Company was as follows:
On July 1, 2017, Zoe Corporation purchased the net assets of Soorya Company by paying $415,000 cash and issuing a $50,000 note payable to Soorya Company. At July 1, 2017, the statement of financial position of Soorya Company was as follows:


The recorded amounts all approximate current values except for land (worth $60,000), inventory (worth $125,000), and trademarks (worthless). The receivables are shown net of an allowance for doubtful accounts of $12,000. The amounts for buildings, equipment, and trademarks are shown net of accumulated amortization of $14,000, $23,000, and $47,000, respectively.

Instructions:
(a) Prepare the July 1, 2017 entry for Zoe Corporation to record the purchase.
(b) Assume that Zoe is a private entity and tested its goodwill for impairment on December 31, 2018. Management determined that the reporting unit’s carrying amount (including goodwill) was $500,000 and that the reporting unit’s fair value (including goodwill) was $450,000. Determine if there is any impairment and prepare any necessary entry on December 31, 2018. Zoe applies ASPE.
(c) Repeat part (a), assuming that the purchase price was $204,000, all paid in cash.
(d) Based on part (a), assume now that Zoe is a public entity and tested its goodwill for impairment on December 31, 2018. The cash-generating unit’s values (including goodwill) are as follows:

Carrying amount………………………………………$500,000
Value in use……………………………………………….475,000
Fair value…………………………………………………..450,000
Disposal costs………………………………………………..25,000

Determine if there is any impairment and prepare any necessary entry on December 31, 2018.
(e) Based on part (a), discuss factors that Zoe may have considered in deciding to pay total consideration of $465,000 for Soorya.

The recorded amounts all approximate current values except for land (worth $60,000), inventory (worth $125,000), and trademarks (worthless). The receivables are shown net of an allowance for doubtful accounts of $12,000. The amounts for buildings, equipment, and trademarks are shown net of accumulated amortization of $14,000, $23,000, and $47,000, respectively. Instructions: (a) Prepare the July 1, 2017 entry for Zoe Corporation to record the purchase. (b) Assume that Zoe is a private entity and tested its goodwill for impairment on December 31, 2018. Management determined that the reporting unit’s carrying amount (including goodwill) was $500,000 and that the reporting unit’s fair value (including goodwill) was $450,000. Determine if there is any impairment and prepare any necessary entry on December 31, 2018. Zoe applies ASPE. (c) Repeat part (a), assuming that the purchase price was $204,000, all paid in cash. (d) Based on part (a), assume now that Zoe is a public entity and tested its goodwill for impairment on December 31, 2018. The cash-generating unit’s values (including goodwill) are as follows: Carrying amount………………………………………$500,000 Value in use……………………………………………….475,000 Fair value…………………………………………………..450,000 Disposal costs………………………………………………..25,000 Determine if there is any impairment and prepare any necessary entry on December 31, 2018. (e) Based on part (a), discuss factors that Zoe may have considered in deciding to pay total consideration of $465,000 for Soorya.





Transcribed Image Text:

Cash Accounts receivable Inventory Land Buildings (net) Equipment (net) Trademarks (net) $ 75,000 102,000 98,000 50,000 75,000 90,000 49,000 Accounts payable Soorya, capital $300,000 239,000 $539,000 $539,000


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2.99

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