E7-74 (Learning Objectives 5, 6: Account for goodwill and impairment) Macy’s, Inc., is one the nation’s premier retailers, with fiscal 2010 sales of $25 billion. The company operates about 810 Macy’s department stores and furniture galleries. In 2005, Macy’s acquired May Department Stores, Inc. Excerpts from the notes to the financial statements for the year ended January 31, 2009, provide details about the purchase and intangible assets.

 

Note 2: Acquisition

The aggregate purchase price for the merger with May (the “Merger”) was approximately $11.7 billion, including approximately $5.7 billion of cash and approximately 100 million shares of Company common stock. The value of       the approximately 100 million shares of Company common stock was determined based on the average market price   of the Company’s stock from February 24, 2005 to March 2, 2005. In connection with the Merger, the Company also assumed approximately $6.0 billion of May    debt.

The May purchase price has been allocated to the assets acquired and liabilities assumed based on their fair values, and is subject to the final fair value determination of certain assets and liabilities. The following table summarizes the preliminary purchase price allocation at the date of  acquisition:

 

			(millions)
		Current assets, excluding assets of discontinued operations	$   5,288
		Assets of discontinued operations	2,264
		Property and equipment	6,579
		Goodwill	8,946
		Intangible assets	679
		Other assets Total assets acquired Total liabilities assumed	31
			23,787 (12,038)
		Total purchase price	11,749

 

 

Note 8: Goodwill

Note 8: Goodwill

 

			Jan 31, 2009	Jan 31, 2008	Jan 31, 2007
		Non-amortizing intangible assets
		(Goodwill and tradenames)	$4,157	$9,610	$9,691

 

During 2008, the Company recorded a goodwill impairment charge of $5,382 million based on the result of goodwill impairment testing as of January 31,   2009.

 

 

 

▶ Requirements

1.    Prepare the entry (in millions) to record the purchase of May Department Stores.

2. Record the 2008 impairment of goodwill.