Calculation of and Journal Entries for Impairment of Goodwill
Gandaph $\bold{\text{Carrying Amount of Net Assets Including Goodwill}}$

question 46

Essay

Calculation of and journal entries for impairment of goodwill
Gandaph Corporation purchased a division five years ago for $ 3 million. The division has been identified as a reporting unit that is cash-generating under IFRS. Management is reviewing the division for impairment of goodwill and has estimated the fair value of the reporting unit to be $ 3.2 million and the unit's value in use to be $ 3.3 million. In addition, there would be $ 75,000 in direct costs should the company decide to sell. The carrying amounts of the division's net assets, including the associated goodwill of $ 1,350,000, are listed below.
$\bold{\text{Carrying Amount of Net Assets Including Goodwill}}$
$$\begin{array} { l r } \text { Cash } & \$ 300,000 \\\text { Receivables } & 450,000 \\\text { Inventory } & 1,050,000 \\\text { Property, plant, and equipment (net) } & 1,200,000 \\\text { Goodwill } & 1,350,000 \\\text { Less: Accounts and notes payable } & ( 750,000 ) \\\text { Net assets, at carrying amounts } & \$ 3,600,000\end{array}$$
Instructions
Determine if goodwill is impaired and provide the related journal entries, if any, under both ASPE and IFRS.

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Definitions:

Rigid and Logical Thinking

A cognitive style characterized by inflexible adherence to rules or the logical analysis of information, often at the expense of emotional understanding or creative problem-solving.

Ellis

Likely referring to Albert Ellis, an American psychologist known for developing Rational Emotive Behavior Therapy (REBT).

Catharsis Hypothesis

The theory that expressing or releasing strong emotions leads to relief or liberation from those feelings.

Behaving Aggressively

This refers to actions or behaviors characterized by anger or hostility, which may harm or intend to harm others either physically or verbally.