Intermediate Accounting
1st Edition
ISBN: 9780132162302
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
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Chapter 12, Problem 12.5BE
Indefinite-Life Intangible Asset Impairment. Genius Auto Malls recently conducted its annual impairment review of the value of its trademark (an indefinite-life intangible asset), which it currently carries at $2,500,000. Evidence indicates that the trademark may be impaired. Genius estimates the future
| Future Period | Cash-Flow Projection |
| Year 1 | $ 800,000 |
| Year 2 | 700,000 |
| Year 3 | 460,000 |
| Year 4 | 140,000 |
| Year5 | 100,000 |
| Total | $2,200,000 |
The company estimates that the fair value of the trademark is $1,700,000. Determine whether the trademark is impaired. If so, what is the amount of the impairment loss?
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Students have asked these similar questions
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.
с.
2. What is the impairment loss on patent?
a. 2,000,000
b. 4,800,000
c. 2,690,000
d. 1,490,000
8. ABC Company purchased a building on January 1, 2018 for P10, 000,000. The building has been depreciated using the straight-line method with a 25-year useful life with no residual value. On December 31, 2021, ABC is evaluating the building for possible impairment. The building has a remaining useful life of 15 years and is expected to generate cash inflows of P700,000 per year. The applicable discount rate is 8%. Round off present value factor to two decimal places. The fair value of the building on December 31, 2021 is P5, 300,000. What amount should be recognized as impairment loss on December 31, 2021?
5. DEF Company purchased a building on January 1, 2018 for P10, 000,000. The building has been depreciated using the straight-line method with a 25-year useful life with no residual value. On December 31, 2021, DEF is evaluating the building for possible impairment. The building has a remaining useful life of 15 years and is expected to generate cash inflows of P700,000 per year. The applicable discount rate is 8%. Round off present value factor to two decimal places. The fair value of the building on December 31, 2021 is P5, 300,000. What is the recoverable amount of the asset?
Chapter 12 Solutions
Intermediate Accounting
Ch. 12 - Prob. 12.1QCh. 12 - Can firms group all property, plant, and equipment...Ch. 12 - Prob. 12.3QCh. 12 - Prob. 12.4QCh. 12 - Do firms follow the same steps for impairment...Ch. 12 - Prob. 12.6QCh. 12 - Prob. 12.7QCh. 12 - Prob. 12.8QCh. 12 - Under IFRS, if a firm recovers an impairment loss...Ch. 12 - Under IFRS, when do firms test plant assets and...
Ch. 12 - Prob. 12.11QCh. 12 - Prob. 12.12QCh. 12 - Prob. 12.1MCCh. 12 - Prob. 12.2MCCh. 12 - Prob. 12.3MCCh. 12 - Prob. 12.4MCCh. 12 - Prob. 12.5MCCh. 12 - Prob. 12.6MCCh. 12 - Prob. 12.1BECh. 12 - Prob. 12.2BECh. 12 - Prob. 12.3BECh. 12 - Prob. 12.4BECh. 12 - Indefinite-Life Intangible Asset Impairment....Ch. 12 - Prob. 12.6BECh. 12 - Prob. 12.7BECh. 12 - Prob. 12.8BECh. 12 - Prob. 12.9BECh. 12 - Prob. 12.10BECh. 12 - Impairment Reversal. IFRS. Perlu Products an IFRS...Ch. 12 - Prob. 12.12BECh. 12 - Prob. 12.13BECh. 12 - Prob. 12.14BECh. 12 - Prob. 12.15BECh. 12 - Prob. 12.16BECh. 12 - Prob. 12.17BECh. 12 - Prob. 12.18BECh. 12 - Prob. 12.19BECh. 12 - Prob. 12.20BECh. 12 - Prob. 12.21BECh. 12 - Prob. 12.22BECh. 12 - Prob. 12.23BECh. 12 - Tangible Asset Impairment. Henne Optical...Ch. 12 - Tangible Asset Impairment Loss. Use the same...Ch. 12 - Prob. 12.3ECh. 12 - Prob. 12.4ECh. 12 - Prob. 12.5ECh. 12 - Tangible Asset Impairment Loss, IFRS. Use the same...Ch. 12 - Prob. 12.7ECh. 12 - Prob. 12.8ECh. 12 - Prob. 12.9ECh. 12 - Assets Held for Disposal. Hattie Corporation...Ch. 12 - Prob. 12.11ECh. 12 - Asset Revaluation, Downwards, IFRS. Lousa Company...Ch. 12 - Tangible Asset Impairment. Chrispian Cookies, Inc....Ch. 12 - Prob. 12.2PCh. 12 - Tangible Asset Impairment. Using the same...Ch. 12 - Prob. 12.4PCh. 12 - Goodwill Impairment, Tangible Fixed Assets, and...Ch. 12 - Tangible Asset Impairment, Potential Reversal,...Ch. 12 - Prob. 12.7PCh. 12 - Prob. 12.8PCh. 12 - Prob. 12.9PCh. 12 - Comprehensive Asset Revaluation Problem (Initial...Ch. 12 - Prob. 12.11PCh. 12 - Judgment Case 1: Impairments of PPE under IFRS...Ch. 12 - Prob. 2JCCh. 12 - Prob. 3JCCh. 12 - Surfing the Standards Case 1: Impairments of PPE...Ch. 12 - Prob. 2SSCCh. 12 - Financial Statement Analysis Case 1: Long-Lived...Ch. 12 - Prob. 1BCCCh. 12 - Basis for Conclusions Case 2: Intangible Assets ...Ch. 12 - Basis for Conclusions Case 3: Goodwill Impairment...
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