In Performing the Impairment Test for Goodwill, the Company Had

question 23

Multiple Choice

In performing the impairment test for goodwill, the company had the following 2016 and 2017 information available.
$\begin{array}{lll}&2016&2017\\\text { Fair value of the reporting unit } & \$ 350,000 & \$ 400,000 \\\text { Net book value (including } \$ 50,000 \text { goodwill) } & \$ 360,000 & \$ 380,000\end{array}$
Assume that the carrying value of the identifiable assets are a reasonable approximation of their fair values.Based upon this information what are the 2016 and 2017 adjustment to goodwill, if any
$\quad$$\quad$ 2016 $\quad$$\quad$ $\quad$$\quad$ 2017

• A)no adjustment \(\quad \)$20,000 decrease
• B)$10,000 increase \(\quad \)$20,000 decrease
• C)$10,000 decrease \(\quad \)$20,000 decrease
• D)$10,000 decrease \(\quad \)no adjustment

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Definitions:

Variable Manufacturing Costs

Costs of production that fluctuate with the volume of output, including expenses like raw materials and direct labor.

Variable Selling

Costs related to selling activities that vary with sales volume, distinct from fixed sales costs.

Fixed Manufacturing Overhead

Regular, unchanging costs associated with operating a manufacturing facility, excluding variable costs, such as rent, utilities, and salaries for management.

Margin of Safety

The difference between actual or expected sales and the break-even point, representing the cushion against potential losses.