Francisco Inc. acquired 100 percent of the outstanding voting shares of Beltran Company on January 1, 2011. To obtain these shares, Francisco payed $450,000 in cash and issued 104,000 shares of its own $1 par value common stock. On this date, Francisco’s stock had a fair value of $12 per share. The combination is a statutory merger with Beltran subsequently dissolved as a legal corporation. For internal accountability purposes, Beltran’s assets and liabilities are assigned to a new reporting unit. The following reports the fair values for the Beltran reporting unit for January 1, 2011, and December 31, 2012, along with their respective book values on December 31, 2012.

Beltran Reporting Unit	Fair Values 1/1/11	Fair Values 12/31/12	Book Values 12/31/12
Cash	$75,000	$50,000	$50,000
Receivables	193,000	225,000	225,000
Inventory	281,000	305,000	300,000
Patents	525,000	600,000	500,000
Customer relationships	500,000	480,000	450,000
Equipment (net)	295,000	240,000	235,000
Goodwill	?	?	400,000
Accounts payable	121,000	175,000	175,000
Long-term liabilities	450,000	400,000	400,000

a. Prepare Francisco’s journal entry to record the assets acquired and the liabilities assumed in the Beltran merger on January 1, 2011.

b. On December 31, 2012, Francisco estimates that the total fair value of the entire Beltran reporting unit is $1,425,000. What amount of goodwill impairment, if any, should Francisco recognize on its 2012 income statement?