(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.

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