Depletion, patent amortization, goodwill impairmentData related to the acquisition of timber rights and intangible assets of Gemini Company during the current year ended December 31 are as follows:On December 31, Gemini Company determined that $3,000,000 of goodwill was impaired.Governmental and legal costs of $920,000 were incurred by Gemini Company on June 30 in obtaining a patent with an estimated economic life of eight years. Amortization is to be for one-half year.Timber rights on a tract of land were purchased for $1,350,000 on March 6. The stand of timber is estimated at 15,000,000 board feet. During the current year, 3,300,000 board feet of timber were cut and sold.Indicate the effects on the liquidity metric free cash flow and profitability metric asset turnover for each of the following: LiquidityFree Cash FlowProfitabilityAsset Turnover1. Impaired goodwill(Higher, lower or no effect)(Higher, lower or no effect)2. Patent amortization(Higher, lower or no effect)(Higher, lower or no effect)3. Natural resource depletion(Higher, lower or no effect)(Higher, lower or no effect)

When the effect of an adjustment effects the free cash flow(FCF) it will be marked as higher or…

Answered: Depletion, patent amortization,…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Depletion, patent amortization, goodwill impairment

Data related to the acquisition of timber rights and intangible assets of Gemini Company during the current year ended December 31 are as follows:

On December 31, Gemini Company determined that $3,000,000 of goodwill was impaired.
Governmental and legal costs of $920,000 were incurred by Gemini Company on June 30 in obtaining a patent with an estimated economic life of eight years. Amortization is to be for one-half year.
Timber rights on a tract of land were purchased for $1,350,000 on March 6. The stand of timber is estimated at 15,000,000 board feet. During the current year, 3,300,000 board feet of timber were cut and sold.

Indicate the effects on the liquidity metric free cash flow and profitability metric asset turnover for each of the following:

	Liquidity Free Cash Flow	Profitability Asset Turnover
1. Impaired goodwill	(Higher, lower or no effect)	(Higher, lower or no effect)
2. Patent amortization	(Higher, lower or no effect)	(Higher, lower or no effect)
3. Natural resource depletion	(Higher, lower or no effect)	(Higher, lower or no effect)

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