The fair value of net identifiable assets of a reporting unit of X Company is $300,000. On X Company's books, the carrying value of this reporting unit's net assets is $350,000, which includes $60,000 of goodwill. If the fair value of the reporting unit as a whole is $335,000, what amount of goodwill impairment will be recognized for this unit?

 The fair value of net identifiable assets of a reporting unit of X Company is $300,000. On X Company's books, the carrying value of this reporting unit's net assets is $350,000, which includes $60,000 of goodwill. If the fair value of the reporting unit as a whole is $335,000, what amount of goodwill impairment will be recognized for this unit?

Multiple Choice

$0


$15,000 Correct

$25,000


$35,000

Explanation
$15,000 is correct. The fair value of the reporting unit as a whole is $335,000. The book value of the reporting unit is $350,000. Because the fair value is less than the book value, an impairment loss occurs of $15,000. This $15,000 loss is a reduction in goodwill to $45,000 from $60,000.

$0 is incorrect. The fair value of the reporting unit is less than the book value of the reporting unit, resulting in an impairment loss.

$25,000 and $35,000 are incorrect. The amount of goodwill impairment is only $15,000. The key in this question is the phrase “as a whole” which renders the $300,000 amount useless for the purposes of this question.