Truffle Inc. acquired a patent on January 1, 2015 for $7,800,000. It was expected to have a 10 year life and no residual value. Truffle uses straight-line amortization for its patents. On December 31, 2018, the expected future cash flows from the patent are $518,000 per year for the next six years. The present value of these cash flows, discounted at Truffle’s market interest rate, is $2,120,000. What amount, if any, of impairment loss will be reported on Truffle’s 2018 income statement?
Truffle Inc. acquired a patent on January 1, 2015 for $7,800,000. It was expected to have a 10 year life and no residual value. Truffle uses straight-line amortization for its patents. On December 31, 2018, the expected future cash flows from the patent are $518,000 per year for the next six years. The present value of these cash flows, discounted at Truffle’s market interest rate, is $2,120,000. What amount, if any, of impairment loss will be reported on Truffle’s 2018 income statement?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Truffle Inc. acquired a patent on January 1, 2015 for $7,800,000. It was expected to have a 10 year life and no
residual value. Truffle uses straight-line amortization for its patents. On December 31, 2018, the expected future
discounted at Truffle’s market interest rate, is $2,120,000. What amount, if any, of impairment loss will be reported
on Truffle’s 2018 income statement?
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