On January 1, Prine, Inc., acquired 100 percent of Lydia Company’s common stock for a fair value of $120,000,000 in cash and stock. Lydia’s assets and liabilities equaled their fair values except for its equipment, which was undervalued by $500,000 and had a 10-year remaining life. Prine specializes in media distribution and viewed its acquisition of Lydia as a strategic move into content ownership and creation. Prine expected both cost and revenue synergies from controlling Lydia’s artistic content (a large library of classic movies) and its sports programming specialty video operation. Accordingly, Prine allocated Lydia’s assets and liabilities (including $50,000,000 of goodwill) to a newly formed operating segment appropriately designated as a reporting unit. The fair values of the reporting unit’s identifiable assets and liabilities through the first year of operations were as follows.

Fair Values
Account	1-Jan	31-Dec
Cash	$215,000	$109,000
Receivables (net)	525,000	897,000
Movie library (25-year life)	40,000,000	60,000,000
Broadcast licenses (indefinite life)	15,000,000	20,000,000
Equipment (10-year life)	20,750,000	19,000,000
Current liabilities	490,000	650,000
Long-term debt	6,000,000	6,250,000

However, Lydia’s assets have taken longer than anticipated to produce the expected synergies with Prine’s operations. At year-end, Prine reduced its assessment of the Lydia reporting unit’s fair value to $110,000,000. At December 31, Prine and Lydia submitted the following balances for consolidation:

Prine, Inc.	Lydia Co.
Revenues	($18,000,000)	($12,000,000)
Operating expenses	10,350,000	11,800,000
Equity in Lydia earnings	150,000	NA
Dividends paid	300,000	80,000
Retained earnings, 1/1	52,000,000	2,000,000
Cash	260,000	109,000
Receivables (net)	210,000	897,000
Investment in Lydia	120,070,000	NA
Broadcast licenses	350,000	14,014,000
Movie library	365,000	45,000,000
Equipment (net)	136,000,000	17,500,000
Current liabilities	755,000	650,000
Long-term debt	22,000,000	7,250,000
Common stock	175,000,000	67,500,000

a. What is the relevant initial test to determine whether goodwill could be impaired?

b. At what amount should Prine record an impairment loss for its Lydia reporting unit for the year?

c. What is consolidated net income for the year?

d. What is the December 31 consolidated balance for goodwill?

e. What is the December 31 consolidated balance for broadcast licenses?

f. Prepare a consolidated worksheet for Prine and Lydia (Prine’s trial balance should first be adjusted for any appropriate impairment loss).