Orlando Packaging Company purchased a patent on a box-folding machine for $160,000 on July 1, 2012. The useful life was estimated at 20 years. There were 19 years remaining on the patent when it was purchased. In 2019, the CEO of Orlando Packaging noted a decrease, industry-wide, in the demand for folded boxes. As a result, an impairment analysis was done as of June 30, 2019. The CEO estimated that the patent had a remaining useful life of 5 years. Expected annual cash flows over the next 5 years were estimated at $20,000. The discount rate used by Orlando Packaging is 5%. The present value of the cash flows is $14,463 1. Was the Orlando Packaging Company patent impaired at June 30, 2019? If so, what was the amount of the impairment loss? O A) No; $0 O B) Yes; $14,463 O C) Yes; $17,410 O D) Yes; $4,000
Orlando Packaging Company purchased a patent on a box-folding machine for $160,000 on July 1, 2012. The useful life was estimated at 20 years. There were 19 years remaining on the patent when it was purchased. In 2019, the CEO of Orlando Packaging noted a decrease, industry-wide, in the demand for folded boxes. As a result, an impairment analysis was done as of June 30, 2019. The CEO estimated that the patent had a remaining useful life of 5 years. Expected annual cash flows over the next 5 years were estimated at $20,000. The discount rate used by Orlando Packaging is 5%. The present value of the cash flows is $14,463 1. Was the Orlando Packaging Company patent impaired at June 30, 2019? If so, what was the amount of the impairment loss? O A) No; $0 O B) Yes; $14,463 O C) Yes; $17,410 O D) Yes; $4,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Orlando Packaging Company purchased a patent on a box-folding machine for $160,000 on July 1,
2012. The useful life was estimated at 20 years. There were 19 years remaining on the patent when
it was purchased. In 2019, the CEO of Orlando Packaging noted a decrease, industry-wide, in the
demand for folded boxes. As a result, an impairment analysis was done as of June 30, 2019. The
CEO estimated that the patent had a remaining useful life of 5 years. Expected annual cash flows
over the next 5 years were estimated at $20,000. The discount rate used by Orlando Packaging is
5%. The present value of the cash flows is $14,463
1. Was the Orlando Packaging Company patent impaired at June 30, 2019? If so, what was the
amount of the impairment loss?
O A) No; $0
O B) Yes; $14,463
C) Yes; $17,410
O D) Yes; $4,000
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