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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E12.1B (L0 1,2) (Classification Issues—Intangibles) Presented below is a list of items that could be included in the intan- gibleassets section of the balance sheet. 1. Cost of purchasing a patent from an inventor. 2. Unrecovered costs of a successful legal suit to protect the patent. 3. Cost of purchasing a copyright. 4. Long-term receivables. 5. Cost of purchasing a trademark. 6. Cost of developing a trademark. 7. Research and development costs. 8. Cost of conceptual formulation of possible product alternatives. 9. Legal costs incurred in securing a patent. 10. Cost of developing a patent. 11. Timberland. 12. Lease prepayment (6 months’ rent paid in advance). 13. Cost of searching for applications of new research findings. 14. Operating losses incurred in the start-up of a business. 15. Purchase cost of a franchise. 16. Goodwill generated internally. 17. Goodwill acquired in the purchase of a business. 18. Cost of testing in search for product alternatives. 19. Training costs…