Correct. Here we need to first determine if there is a potential impairment loss (which is implied by the question): Under GAAP, there is a potential impairment loss if Fair Value < Carrying Value: $1,950,00 < $1,980,000
We know the Current Carrying Value of Goodwill = Purchase Price - Fair Value of Net Assets = $2,000,000 - $1,700,000 = $300,000
Implied Goodwill = Fair value of reporting Unit - Net Assets = $1,950,000 - $1,775,000 = $175,000
Therefore, Impairement Loss = Current Carrying Value of Goodwill - Implied Goodwill = $300,000 - $175,000 = $125,000
Thank you for the reply. I will double-back on this in the near future. I am re-studying Quantitative today.