Intermediate Accounting (2nd Edition)
2nd Edition
ISBN: 9780134730370
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
how to record the 2020 amortization expense of Jan.2?
why the solution says use 45,000 *1/9 instead of *1/10
On January 1, 2022, Christine Company acquired a trademark for P3,000,000. The trademark has eight years remaining
in the legal life. It is anticipated that the trademark will be renewed in the future indefinitely without problem. On
December 31, 2022, the trademark is assessed for impairment. Because of a decline in economy, the trademark is
expected to generate cash flows of just P120,000 annually. The useful life of the trademark still extends beyond the
foreseeable horizon. The appropriate discount rate is 6%. What amount should be recognized as impairment loss on
trademark for 2022?
A. 1,000,000
B. 2,000,000
C. 3,000,000
D. Zero
Chapter 12 Solutions
Intermediate Accounting (2nd Edition)
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 - Financial Statement Analysis Case 1: Long-Lived...Ch. 12 - Surfing the Standards Case 1: Impairments of PPE...Ch. 12 - Prob. 2SSCCh. 12 - Prob. 1BCCCh. 12 - Basis for Conclusions Case 2: Intangible Assets ...Ch. 12 - Basis for Conclusions Case 3: Goodwill Impairment...
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