On May 31, 2013, Armstrong Company paid $3,300,000 to acquire all the common stock of Hall Corp., which became a division of Armstrong. Hall reported the following balance sheet at the time of the acquisition:
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It was determined at the date of the purchase that the fair value of the identifiable net assets of Hall was $2,800,000. At December 31, 2013, Hall reports the following balance sheet information
Current assets ........................800,000
Non current assets (including goodwill recognized in purchase) .....2,400,000
Current Liabilities ......................(700,000)
Long term liabilities ......................(500,000)
Net assets ....................... $2,000,000
It is determined that the fair value of the Hall division is $2,100,000. The recorded amount of Hall's net assets (excluding goodwill) is same as fair value, except for property, plant, and equipment, which has a fair value of $200,000 above the carrying value.
Instructions:
a) Compute the amount of goodwill recognized, if any, on May 31, 2013
b) Determine the impairment loss, if any, to be recorded on December 31, 2013
c) Assume that the fair value of the Hall division is $1,950,000 instead of $2,100,000. Prepare the journal entry to record the impairment loss, if any, on December 31,2013.