Goodwill Purchased/ Subsequent Write-Down

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  • JohnH
    Senior Member
    • Apr 2007
    • 5339
    #1

    Goodwill Purchased/ Subsequent Write-Down

    Corporation performing a service purchased client list, contact info, and introductions to clients from an individual in 2008 for $60K. Purchase price was financed over 5 years, with $12K being paid in 2008 and $12K paid in 2009. Corp claimed amortization of goodwill of $4K in 2008 and $4K in 2009.

    In early 2010, some client relationships went south due to no fault of buyer or seller, and after some negotiations the seller agreed to reduce the remaining balance from $36K down to $18K. How should goodwill be handled in 2010 and going forward? Reduce the remaining goodwill deduction to $1,385/yr for the remaining 13 years, or something more complicated?
    "The only function of economic forecasting is to make astrology look respectful" - John Kenneth Galbraith
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    • Burke
      Senior Member
      • Jan 2008
      • 7068
      #2
      Originally posted by JohnH
      Corporation performing a service purchased client list, contact info, and introductions to clients from an individual in 2008 for $60K. Purchase price was financed over 5 years, with $12K being paid in 2008 and $12K paid in 2009. Corp claimed amortization of goodwill of $4K in 2008 and $4K in 2009.

      In early 2010, some client relationships went south due to no fault of buyer or seller, and after some negotiations the seller agreed to reduce the remaining balance from $36K down to $18K. How should goodwill be handled in 2010 and going forward? Reduce the remaining goodwill deduction to $1,385/yr for the remaining 13 years, or something more complicated?
      Correct me if I am wrong, but something is not adding up here in my feeble brain. Amt paid = $24,000 + Amt Due = $18,000 = $42,000. (Reduced from original $60K)

      $42,000 - $8K (amt deducted) = $ 34,000. $34,000 divided by 13 yrs remaining = $2,615.39. See no problem with method you are proposing.
      Last edited by Burke; 10-20-2010, 03:14 PM.

        Comment

        • JohnH
          Senior Member
          • Apr 2007
          • 5339
          #3
          Burke. You are (of course) correct in your figures. I was failing to reset to the new goodwill figure minus amortization already claimed. Thanks for catching that and for stretching my feeble brain. Nice to know my APPROACH is right even if my MATH SKILLS leave something to be desired.
          "The only function of economic forecasting is to make astrology look respectful" - John Kenneth Galbraith

            Comment

            • Burke
              Senior Member
              • Jan 2008
              • 7068
              #4
              Aren't you glad our software catches all this stuff? Heh, heh......

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