(Note: the Following Problem Requires Students to Determine the Amount

question 59

Essay

(Note: The following problem requires students to determine the amount of goodwill in a business acquisition, a Chapter 10 topic.)

In 2016, Quasar Ltd. acquired all of the common stock of Penlight Laser for $124 million. The fair value of Penlight's identifiable tangible and intangible assets totaled $205 million, and the fair value of liabilities assumed by Quasar was $95 million. Quasar performed a required goodwill impairment test at the end of its fiscal year ended December 31, 2018. Management has provided the following information:
$\begin{array}{lr}\text { Fair value of Penlight } & \$ 115 \text { million } \\\text { Fair value of Penlight's net assets (excluding goodwill) } & 107 \text { million } \\\text { Book value of Penlight's net assets (including goodwill) } & 125 \text { million }\end{array}$
Required:
1. Determine the amount of goodwill that resulted from the Penlight acquisition.
2. Determine the amount of goodwill impairment loss that Quasar should recognize at the end of 2018, if any.
3. If an impairment loss is required, prepare the journal entry to record the loss.

---

Definitions:

Marketing Channel

A set of practices or activities necessary to transfer the ownership of goods, and to move goods from the point of production to the point of consumption.

Farmer's Market

A public marketplace where local farmers and artisans sell their produce, goods, and crafts directly to consumers.

Retailer

A business entity that sells goods or services directly to end consumers.

Intermediaries

Individuals or businesses that act as a middleman in the distribution chain between producers and consumers, such as wholesalers or agents.