Wilbur Company acquired Smith Company on January 1, 2011. As part of the acquisition, $1,000,000 in goodwill was recognized and assigned to Wilbur's Transportation reporting unit. For 2011, earnings from the Transportation reporting unit were $450,000. Separately traded companies with operations similar to the Transportation reporting unit had market values approximately equal to five times earnings. As of December 31, 2011, book values and fair values of the Transportation reporting unit were:
Prepare the impairment test of goodwill as well as any entry needed to record an impairment loss.
Definitions:
Price Capital
The valuation of capital assets based on their cost or market value, contributing to the overall price level of investments.
Demand
The quantity of a good or service that consumers are willing and able to purchase at various price levels at a given period.
Labor
The effort by humans to produce goods or services in the economy.
Resource Demand Curve
A graphical representation showing the relationship between the price of a resource and the quantity of that resource demanded by firms.
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