On January 1, 2020, Downtown Company acquired the following intangible assets: A trademark for P2,000,000. The trademark has a remaining legal life of 8 years. The trademark will be renewed in the future indefinitely without problem. A patent for P6,000,000. The patent has an economic life for just 5 years. On December 31, 2020, the intangible assets are tested for impairment. The trademark is now expected to generate cash flows of just P120,000 per year. The cash flows expected to be generated by the patent amount to P1,000,000 annually for each of the next 4 years. The appropriate discount rate for all intangible assets is 8%. The present value of an ordinary annuity of 1 at 8% for 4 periods is 3.31. 1. What is the total impairment loss on trademark? a. 2,000,000 b. 1,500,000 500,000 d. c. 2. What is the impairment loss on patent? a. 2,000,000 b. 4,800,000 c. 2,690,000 d. 1,490,000

On January 1, 2020, Downtown Company acquired the following intangible assets: A trademark for P2,000,000. The trademark has a remaining legal life of 8 years. The trademark will be renewed in the future indefinitely without problem. A patent for P6,000,000. The patent has an economic life for just 5 years. On December 31, 2020, the intangible assets are tested for impairment. The trademark is now expected to generate cash flows of just P120,000 per year. The cash flows expected to be generated by the patent amount to P1,000,000 annually for each of the next 4 years. The appropriate discount rate for all intangible assets is 8%. The present value of an ordinary annuity of 1 at 8% for 4 periods is 3.31. 1. What is the total impairment loss on trademark? a. 2,000,000 b. 1,500,000 500,000 d. c. 2. What is the impairment loss on patent? a. 2,000,000 b. 4,800,000 c. 2,690,000 d. 1,490,000

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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