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Estimate the amount of goodwill impairment for each company

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Reference no: EM133189712

Question - As a new intern for the local branch office of a national brokerage firm, you are excited to get an assignment that allows you to use your accounting expertise. Your supervisor provides you with the spreadsheet below, which contains data for the most recent quarter for three companies that the firm has been recommending to its clients as "buys." Each of the companies' returns on assets has outperformed their industry cohorts in the past. But, given recent challenges in their markets, there is concern that the companies may experience operating challenges and lower earnings. (All numbers in millions, except return on assets.)

Company

Fair
Value of
Company

Book Value
(Net Assets
Including
Goodwill)

Carrying
Value of
Goodwill

Return on
Assets

Sprint Nextel

$36,541

$51,381

$30,668

3.8%

Washington Mutual

11,592

23,881

9,032

2.4%

E* Trade Financial

1,632

4,104

2,050

5.0%

Required - Estimate the amount of goodwill impairment for each company and prepare the journal entry to record the impairment. For each company, you may assume that the book value less the carrying value of the goodwill approximates the fair value of the company's net assets.

Reference no: EM133189712

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