/*! This file is auto-generated */ .wp-block-button__link{color:#fff;background-color:#32373c;border-radius:9999px;box-shadow:none;text-decoration:none;padding:calc(.667em + 2px) calc(1.333em + 2px);font-size:1.125em}.wp-block-file__button{background:#32373c;color:#fff;text-decoration:none} Q12-13E (Copyright Impairment) Presented... [FREE SOLUTION] | 91影视

91影视

Log out

Learning Materials

Features

Discover

Chapter 12: Q12-13E (page 643)

(Copyright Impairment) Presented below is information related to copyrights owned by Mare Company at December 31, 2017.

Cost

\(8,600,000

Carrying amount

4,300,000

Expected future net cash flows

4,000,000

Fair value

3,200,000

Assume that Mare Company will continue to use this copyright in the future. As of December 31, 2017, the copyright is estimated to have a remaining useful life of 10 years.

Instructions

  1. Prepare the journal entry (if any) to record the impairment of the asset at December 31, 2017. The company does not use accumulated amortization accounts.
  2. Prepare the journal entry to record amortization expense for 2018 related to the copyrights.
  3. The fair value of the copyright at December 31, 2018, is \)3,400,000. Prepare the journal entry (if any) necessary to record the increase in fair value.

Short Answer

Expert verified
  1. Loss on impairments = $1,100,00
  2. Amortization value= $320,000
  3. No entry is necessary

Step by step solution

01

Step-by-Step SolutionStep 1: Meaning of Copyright

The term "copyright" refers to the exclusive right to reproduce a work by the creator or his authorized representative. In simpler terms, a copyright is a legal right that belongs to the owner of intellectual property.

02

(a) Preparing journal entry to record the impairment of the asset at December 31, 2017

Date

Particular

Debit ($)

Credit ($)

Dec. 31, 2017

Loss on Impairment

1,100,000

Copyrights

1,100,000

Working Notes:

Calculating the amount of loss on impairment

Carrying amount

$4,300,000

Fair value

3,200,000

Loss on impairment

$1,100,000

Note: The estimated net cash flows of $4,000,000 are less than the carrying value of $4,300,000. The asset fails the recoverability test.

03

(b) Preparing the journal entries to record amortization expenses for 2018 related to the copyrights.

Date

Particular

Debit ($)

Credit ($)

Amortization Expense

320,000

Copyrights

320,000

Working notes:

Calculating the amount of amortization expense

New carrying amount

$3,200,000

Useful life

10 years

Amortization per year

$ 320,000



04

(c) Explaining journal entry to record the increase in fair value

No entry is necessary to record the increase in the fair value of copyright. For assets kept for use, restoration of any impairment loss is not authorized.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Over 30 million students worldwide already upgrade their learning with 91影视!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Presented below is selected information related to Martin Burke Inc. at year-end. All these accounts have debit balances.

Cable television franchises

Film contract rights

Music copyrights

Customer lists

Research and development costs

Prepaid expenses

Goodwill

Covenants not to compete

Cash

Brand names

Discount on notes payable

Notes receivable

Accounts receivable

Investments in affiliated companies

Property, plant, and equipment

Organization costs

Internet domain name

Land

Instructions:

Identify which items should be classified as an intangible asset. For those items not classified as an intangible asset, indicate where they would be reported in the financial statements.

Raleigh Corp. has an investment with a carrying value (equity method) on its books of \(170,000 representing a 30% interest in Borg Company, which suffered a \)620,000 loss this year. How should Raleigh Corp. handle its proportionate share of Borg鈥檚 loss?

Question: Sinise Industries acquired two copyrights during 2017. One copyright related to a textbook that was developed internally at a cost of \(9,900. This textbook is estimated to have a useful life of 3 years from September 1, 2017, the date it was published. The second copyright (a history research textbook) was purchased from University Press on December 1, 2017, for \)24,000. This textbook has an indefinite useful life. How should these two copyrights be reported on Sinise鈥檚 balance sheet as of December 31, 2017?

Question: (Accounting for Franchise, Patents, and Trademark) Information concerning Sandro Corporation鈥檚 intangible assets is as follows.

  1. On January 1, 2017, Sandro signed an agreement to operate as a franchisee of Hsian Copy Service, Inc. for an initial franchise fee of \(75,000. Of this amount, \)15,000 was paid when the agreement was signed, and the balance is payable in 4 annual payments of \(15,000 each, beginning January 1, 2018. The agreement provides that the down payment is not refundable and no future services are required of the franchisor. The present value at January 1, 2017, of the 4 annual payments discounted at 14% (the implicit rate for a loan of this type) is \)43,700. The agreement also provides that 5% of the revenue from the franchise must be paid to the franchisor annually. Sandro鈥檚 revenue from the franchise for 2017 was \(900,000. Sandro estimates the useful life of the franchise to be 10 years. (Hint: You may want to refer to Chapter 18 to determine the proper accounting treatment for the franchise fee and payments.)
  2. Sandro incurred \)65,000 of experimental and development costs in its laboratory to develop a patent that was granted on January 2, 2017. Legal fees and other costs associated with registration of the patent totaled \(17,600. Sandro estimates that the useful life of the patent will be 8 years.
  3. A trademark was purchased from Shanghai Company for \)36,000 on July 1, 2014. Expenditures for successful litigation in defense of the trademark totaling $10,200 were paid on July 1, 2017. Sandro estimates that the useful life of the trademark will be 20 years from the date of acquisition.

Instructions

  1. Prepare a schedule showing the intangible assets section of Sandro鈥檚 balance sheet at December 31, 2017. Show supporting computations in good form.

Prepare a schedule showing all expenses resulting from the transactions that would appear on Sandro鈥檚 income statement for the year ended December 31, 2017. Show supporting computations in good form.

Zoop Corporation purchased for \(300,000 a 30% interest in Murphy, Inc. This investment enables Zoop to exert significant influence over Murphy. During the year, Murphy earned net income of \)180,000 and paid dividends of $60,000. Prepare Zoop鈥檚 journal entries related to this investment.
See all solutions

Recommended explanations on Business Studies Textbooks

International Business

Read Explanation

Introduction to Business

Read Explanation

Business Operations

Read Explanation

Actuarial Science in Business

Read Explanation

Intermediate Accounting

Read Explanation

Influences On Business

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.