Computing Impairment of Intangible Assets Stiller Company had the following information for its three intangible assets. 1. Patent: A patent was purchased for $140,000 on June 30 of Year 1; Stiller estimated the useful life of the patent to be 15 years. On December 31 of Year 3, the estimated future cash flows attributed to the pat were $119,000. The fair value of the patent was $105,000. 2. Trademark: A trademark was purchased for $7,000 on August 31 of Year 2. The trademark is considered to have an indefinite life. The fair value of the trademark on December 31 of Year 3 is $3,500. 3. Goodwill: Stiller recorded goodwill in January of Year 2, related to a purchase of another company. The carrying value of goodwill is $42,000 on December 31 of Year 3. On December 31 of Year 3, the segment for which the goodwill relates had a fair value of $812,000. The book value of the net assets of the segment (including goodwill) is $840,000. a. Classify each of the intangible assets above as a finite life intangible or an indefinite life intangible. Patent Finite life intangible Trademark Indefinite life intangible Goodwill Indefinite life intangible b. Determine the carrying value of each intangible asset on December 31 of Year 3, prior to testing for impairment. Assume that the company uses the straight-line method to amortize intangible assets, and no impairment was reported prior to Year 3. •Note: Round each of your answers to the nearest whole dollar. $ 0 Carrying value of patent, Dec. 31, Year 3, before impairment testing Carrying value of trademark, Dec. 31, Year 3, before impairment testing $ Carrying value of goodwill, Dec. 31, Year 3, before impairment testing $ 0 0
Computing Impairment of Intangible Assets Stiller Company had the following information for its three intangible assets. 1. Patent: A patent was purchased for $140,000 on June 30 of Year 1; Stiller estimated the useful life of the patent to be 15 years. On December 31 of Year 3, the estimated future cash flows attributed to the pat were $119,000. The fair value of the patent was $105,000. 2. Trademark: A trademark was purchased for $7,000 on August 31 of Year 2. The trademark is considered to have an indefinite life. The fair value of the trademark on December 31 of Year 3 is $3,500. 3. Goodwill: Stiller recorded goodwill in January of Year 2, related to a purchase of another company. The carrying value of goodwill is $42,000 on December 31 of Year 3. On December 31 of Year 3, the segment for which the goodwill relates had a fair value of $812,000. The book value of the net assets of the segment (including goodwill) is $840,000. a. Classify each of the intangible assets above as a finite life intangible or an indefinite life intangible. Patent Finite life intangible Trademark Indefinite life intangible Goodwill Indefinite life intangible b. Determine the carrying value of each intangible asset on December 31 of Year 3, prior to testing for impairment. Assume that the company uses the straight-line method to amortize intangible assets, and no impairment was reported prior to Year 3. •Note: Round each of your answers to the nearest whole dollar. $ 0 Carrying value of patent, Dec. 31, Year 3, before impairment testing Carrying value of trademark, Dec. 31, Year 3, before impairment testing $ Carrying value of goodwill, Dec. 31, Year 3, before impairment testing $ 0 0
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Computing Impairment of Intangible Assets
Stiller Company had the following information for its three intangible assets.
1. Patent: A patent was purchased for $140,000 on June 30 of Year 1; Stiller estimated the useful life of the patent to be 15 years. On December 31 of Year 3, the estimated future cash flows attributed to the pat
were $119,000. The fair value of the patent was $105,000.
2. Trademark: A trademark was purchased for $7,000 on August 31 of Year 2. The trademark is considered to have an indefinite life. The fair value of the trademark on December 31 of Year 3 is $3,500.
3. Goodwill: Stiller recorded goodwill in January of Year 2, related to a purchase of another company. The carrying value of goodwill is $42,000 on December 31 of Year 3. On December 31 of Year 3, the segment
for which the goodwill relates had a fair value of $812,000. The book value of the net assets of the segment (including goodwill) is $840,000.
a. Classify each of the intangible assets above as a finite life intangible or an indefinite life intangible.
Patent
Finite life intangible
Trademark Indefinite life intangible
Goodwill Indefinite life intangible
b. Determine the carrying value of each intangible asset on December 31 of Year 3, prior to testing for impairment. Assume that the company uses the straight-line method to amortize intangible assets, and no
impairment was reported prior to Year 3.
•Note: Round each of your answers to the nearest whole dollar.
$
0
Carrying value of patent, Dec. 31, Year 3, before impairment testing
Carrying value of trademark, Dec. 31, Year 3, before impairment testing $
Carrying value of goodwill, Dec. 31, Year 3, before impairment testing $
0
0
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