E12.18 (LO 6, 10) Video (Intangible Impairment) The following information is for a copyright owned by Lighting Designs Corp., a private entity, at December 31, 2023. Lighting Designs applies ASPE. Cost $4,300,000 2,150,000 Carrying amount Expected future net cash flows (undiscounted) 2,000,000 Fair value 1,600,000 Assume that Lighting Designs will continue to use this copyright in the future. As at December 31, 2023, the copyright is estimated to have a remaining useful life of 10 years. Instructions a. Prepare the journal entry, if any, to record the asset's impairment at December 31, 2023. b. Prepare the journal entry to record amortization expense for 2024 related to the copyright. c. The copyright's fair value at December 31, 2024, is $2.2 million. Prepare the journal entry, if any, to record the increase in fair value. d. Digging Deeper Using the information from part (a), discuss whether the copyright would be amortized in 2023 before the impairment test is conducted. Would the asset be tested for impairment before or after amortizing the copyright in 2023?

E12.18 (LO 6, 10) Video (Intangible Impairment) The following information is for a copyright owned by Lighting Designs Corp., a private entity, at December 31, 2023. Lighting Designs applies ASPE. Cost $4,300,000 2,150,000 Carrying amount Expected future net cash flows (undiscounted) 2,000,000 Fair value 1,600,000 Assume that Lighting Designs will continue to use this copyright in the future. As at December 31, 2023, the copyright is estimated to have a remaining useful life of 10 years. Instructions a. Prepare the journal entry, if any, to record the asset's impairment at December 31, 2023. b. Prepare the journal entry to record amortization expense for 2024 related to the copyright. c. The copyright's fair value at December 31, 2024, is $2.2 million. Prepare the journal entry, if any, to record the increase in fair value. d. Digging Deeper Using the information from part (a), discuss whether the copyright would be amortized in 2023 before the impairment test is conducted. Would the asset be tested for impairment before or after amortizing the copyright in 2023?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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: (Intangible Impairment) The following information is for a copyright owned by Lighting Designs Corp., a private entity, at December 31, 2023. Lighting Designs applies ASPE. Cost $4,300,000 Carrying amount 2,150,000 Expected future net cash flows (undiscounted) 2,000,000 Fair value 1,600,000 Assume that Lighting Designs will continue to use this copyright in the future. As at December 31, 2023, the copyright is estimated to have a remaining useful life of 10 years. Instructions a) Prepare the journal entry, if any, to record the asset’s impairment at December 31, 2023. b) Prepare the journal entry to record amortization expense for 2024 related to the copyright. c) The copyright’s fair value at December 31, 2024, is $2.2 million. Prepare the journal entry, if any, to record the increase in fair value. d) Digging Deeper. Using the information from part (a), discuss whether the copyright would be amortized in 2023 before the impairment test is conducted. Would the asset be tested for…
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The amount to be included as intangible assets is *A. 345,000B. 490,000C. 410,000D. 350,000
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E12.14 (LO 4) (Copyright Impairment) The following information is related to a copyright owned by Botticelli Company at December 31, 2022. Cost $8,600,000 Carrying amount 4,300,000 Recoverable amount 3,400,000 Assume that Botticelli Company will continue to use this copyright in the future. As of December 31, 2022, the copyright is estimated to have a remaining useful life of 10 years. Instructions a. Prepare the journal entry (if any) to record the impairment of the asset at December 31, 2022. The company does not use accumulated amortization accounts. b. Prepare the journal entry to record amortization expense for 2023 related to the copyright. c. The fair value of the copyright at December 31, 2023, is $3,500,000. Prepare the journal entry (if any) necessary to record the increase in fair value.
E11.6B (LO 1,2,4) (Recording and Amortization of Intangibles) Parrish Company, organized in 2025, has set up a single account for all intangible assets. The following summary discloses the debit entries that have been recorded during 2025: 1/2/25 4/1/25 7/1/25 8/1/25 9/1/25 Purchased patent (8-year life) Purchased goodwill (indefinite life) Purchased franchise with 10-year life; expiration date 7/1/35 Payment for copyright (5-year life) Research and development costs $ 625,000 540,000 675,000 246,000 342,500 $2,428,500 Instructions Prepare the necessary entries to clear the Intangible Assets account and to set up separate accounts for distinct types of intangibles. Make the entries as of December 31, 2025, recording any necessary amor- tization and reflecting all balances accurately as of that date. (Use straight-line amortization.)
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P12.1B (LO 1,2,3,5) (Correct Intangible Asset Account) Dolphin Co., organized in 2019, has set up a single account for all intangible assets. The following summary discloses the debit entries that have been recorded during 2020 and 2021: Intangible Assets $ 60,000 3/1/2020 3/1/2020 4/1/2020 6/30/2020 9/1/2020 12/31/2020 6/30/2021 9/1/2021 10-year franchise agreement; expires 2/28/28 Organization costs Advance payment for 2 years for office space Purchased a patent (8-year life) Cost to develop a patent (10-year life) Net operating loss for 2020 Research and development costs Legal fee to successfully defend internally developed patent 7,000 24,000 80,000 40,000 61,000 265,000 13,500 Instructions Prepare the necessary entries to clear the Intangible Assets account and to set up separate accounts for distinct types of intangibles. Make the entries as of December 31, 2021, recording any necessary amortization and reflecting all balances accurately as of that date. (Ignore income tax…
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The following information is available for Carla Vista Company’s patents: Cost $3190000 Carrying amount 1670000 Expected future net cash flows 1355000 Fair value 1175000 Carla Vista would record a loss on impairment of ?
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