Godo Blossom Inc. purchased a non-renewable licensing agreement for access to proprietary technology that allows it to produce bio-charfrom organic waste. When the 10-year licensing agreement was purchased 6 years ago there were no other companies operating inthe space. However, numerous competitors have emerged in the industry as direct competitors to Blossom Inc. As a result of recentmarket entrants, the market demand for its bio-char products has been steadily declining. The company has the following informationavailable related to the licensing agreement:Licensing agreement at CostEstimated Useful LifeResidual Value$124,50010 years$0فىBlossom Inc. is currently testing this asset for impairment. While the licensing agreement could currently be sold for $39,800,Blossom Inc. plans to keep producing the bio-char two more years. It expects net cash flows from production to be $20,900 yearly andthat it can sell the licensing agreement for $7,400 at the end of year two. The current interest rate is 5%. Assume that Blossom Inc., follows IFRS and uses the rational entity model. Calculate the carrying amount and recoverableamount. (Round answers to 0 decimal places, e.g. 5,275.)Carrying amount of the licensing agreementRecoverable amount$YesNoGAIs there an impairment loss? If yes, how much is the amount? (Round answer to O decimal places, e.g. 5,275.)

An impairment test is done on the asset to assess the worth of the assets at the end of a period.…

Blossom Inc. purchased a non-renewable licensing agreement for access to proprietary technology that allows it to produce bio-char from organic waste. When the 10-year licensing agreement was purchased 6 years ago there were no other companies operating in the space. However, numerous competitors have emerged in the industry as direct competitors to Blossom Inc. As a result of recent market entrants, the market demand for its bio-char products has been steadily declining. The company has the following information available related to the licensing agreement: Licensing agreement at Cost Estimated Useful Life Residual Value $124,500 10 years $0 Blossom Inc. is currently testing this asset for impairment. While the licensing agreement could currently be sold for $39,800, Blossom Inc. plans to keep producing the bio-char two more years. It expects net cash flows from production to be $20,900 yearly and hat it can sell the licensing agreement for $7,400 at the end of year two. The current interest rate is 5%.

Blossom Inc. purchased a non-renewable licensing agreement for access to proprietary technology that allows it to produce bio-char from organic waste. When the 10-year licensing agreement was purchased 6 years ago there were no other companies operating in the space. However, numerous competitors have emerged in the industry as direct competitors to Blossom Inc. As a result of recent market entrants, the market demand for its bio-char products has been steadily declining. The company has the following information available related to the licensing agreement: Licensing agreement at Cost Estimated Useful Life Residual Value $124,500 10 years $0 Blossom Inc. is currently testing this asset for impairment. While the licensing agreement could currently be sold for $39,800, Blossom Inc. plans to keep producing the bio-char two more years. It expects net cash flows from production to be $20,900 yearly and hat it can sell the licensing agreement for $7,400 at the end of year two. The current interest rate is 5%.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 26P

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