On January 1, 2023 (the first day of its fiscal year) Blossom Ltd. acquired a patent which gave the company the right to use a production process. The process met the six criteria for capitalization as an intangible asset. Below is a listing of the events relating to the patent over the five fiscal years from 2023 through 2027: 2023: on January 1, acquired the patent for the production process for a cash payment of $17,500,000, and determined that the process had an indefinite useful life. on December 31, tested the patent for impairment and determined that its fair value was $18,200,000. 2024: on December 31, tested the patent for impairment and determined that its fair value was $16,400,000. 2025: on December 31, tested the patent for impairment and determined that its fair value was $17,300,000. 2026: on January 1, determined that the useful life of the patent was no longer indefinite, its carrying amount was recoverable, its estimated remaining useful life was 8 years, its estimated residual value was $0 and the pattern of economic benefits to be obtained from the patent during those 8 years was evenly spread over those 8 years. on December 31, tested the process for impairment and recoverability and determined that its fair value was $700,000 and its carrying amount was recoverable. 2027: on December 31, tested the patent for impairment and recoverability and determined that its fair value was $0 and its carrying amount was not recoverable.
On January 1, 2023 (the first day of its fiscal year) Blossom Ltd. acquired a patent which gave the company the right to use a production process. The process met the six criteria for capitalization as an intangible asset. Below is a listing of the events relating to the patent over the five fiscal years from 2023 through 2027: 2023: on January 1, acquired the patent for the production process for a cash payment of $17,500,000, and determined that the process had an indefinite useful life. on December 31, tested the patent for impairment and determined that its fair value was $18,200,000. 2024: on December 31, tested the patent for impairment and determined that its fair value was $16,400,000. 2025: on December 31, tested the patent for impairment and determined that its fair value was $17,300,000. 2026: on January 1, determined that the useful life of the patent was no longer indefinite, its carrying amount was recoverable, its estimated remaining useful life was 8 years, its estimated residual value was $0 and the pattern of economic benefits to be obtained from the patent during those 8 years was evenly spread over those 8 years. on December 31, tested the process for impairment and recoverability and determined that its fair value was $700,000 and its carrying amount was recoverable. 2027: on December 31, tested the patent for impairment and recoverability and determined that its fair value was $0 and its carrying amount was not recoverable.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On January 1, 2023 (the first day of its fiscal year) Blossom Ltd. acquired a patent which gave the company the right to use a
production process. The process met the six criteria for capitalization as an intangible asset. Below is a listing of the events relating to
the patent over the five fiscal years from 2023 through 2027:
2023:
on January 1, acquired the patent for the production process for a cash payment of $17,500,000, and determined that the
process had an indefinite useful life.
on December 31, tested the patent for impairment and determined that its fair value was $18,200,000.
2024:
on December 31, tested the patent for impairment and determined that its fair value was $16,400,000.
2025:
on December 31, tested the patent for impairment and determined that its fair value was $17,300,000.
2026:
on January 1, determined that the useful life of the patent was no longer indefinite, its carrying amount was recoverable, its
estimated remaining useful life was 8 years, its estimated residual value was $0 and the pattern of economic benefits to be
obtained from the patent during those 8 years was evenly spread over those 8 years.
on December 31, tested the process for impairment and recoverability and determined that its fair value was $700,000 and its
carrying amount was recoverable.
2027:
on December 31, tested the patent for impairment and recoverability and determined that its fair value was $0 and its
carrying amount was not recoverable.
Transcribed Image Text:Prepare all journal entries related to the patent for the production process Blossom will record from January 1, 2023 to December 31,
2027, using the cost recovery impairment model. (If no entry is required, select "No Entry" for the account titles and enter O for the amounts.
Credit account titles are automatically indented when amount is entered. Do not indent manually. List all debit entries before credit entries.)
Date
Account Titles and Explanation
(To record amortization expense)
(To record loss on impairment)
Debit
Credit
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