/*! 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} Q12-6BE Kenoly Corporation owns a patent... [FREE SOLUTION] | 91影视

91影视

Log out

Learning Materials

Features

Discover

Chapter 12: Q12-6BE (page 638)

Kenoly Corporation owns a patent that has a carrying amount of \(300,000. Kenoly expects future net cash flows from this patent to total \)210,000. The fair value of the patent is $110,000. Prepare Kenoly鈥檚 journal entry, if necessary, to record the loss on impairment.

Short Answer

Expert verified

Expected net future cash flows ($210,000) are less than the carrying value ($300,000), resulting in impairment. The difference between the carrying amount and fair value ($110,000) is used to calculate the loss.

Step by step solution

01

Step-by-Step SolutionStep 1: Calculation

Patents are limited-life intangible assets; hence an impairment test is required in two steps.

1: Compare the carrying amount to the future net cash flows; impairment is necessary if the carrying amount exceeds the future net cash flows.

2: Determine the impairment loss by subtracting the carrying amount from the fair value.

02

Journal Entry

Date

Particulars

JF

Debit

Credit

Loss on Impairment ($300,000 - $110,000)

$190,000

Patents

$190,000

(Being Impairment loss is recorded)

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

Indicate how unrealized holding gains and losses should be reported for debt investments classified as trading, available-for-sale, and held-to-maturity.

Question: (Accounting for Patents) During 2013, Winston Corporation spent \(170,000 in research and development costs. As a result, a new product called the New Age Piano was patented. The patent was obtained on October 1, 2013, and had a legal life of 20 years and a useful life of 10 years. Legal costs of \)18,000 related to the patent were incurred as of October 1, 2013.

Instructions

(a) Prepare all journal entries required in 2013 and 2014 as a result of the transactions above.

(b) On June 1, 2015, Winston spent $9,480 to successfully prosecute a patent infringement suit. As a result, the estimate of useful life was extended to 12 years from June 1, 2015. Prepare all journal entries required in 2015 and 2016.

(c) In 2017, Winston determined that a competitor鈥檚 product would make the New Age Piano obsolete and the patent worthless by December 31, 2018. Prepare all journal entries required in 2017 and 2018.

Fairbanks Corporation purchased 400 shares of Sherman Inc. common stock for \(13,200 (Fairbanks does not have significant influence). During the year, Sherman paid a cash dividend of \)3.25 per share. At year-end, Sherman stock was selling for $34.50 per share. Prepare Fairbanks鈥� journal entries to record (a) the purchase of the investment, (b) the dividends received, and (c) the fair value adjustment. (Assume a zero balance in the Fair Value Adjustmentaccount.)

On January 1, 2017, Dagwood Company purchased at par 6%

bonds having a maturity value of $300,000. They are dated January 1, 2017, and mature January 1, 2022, with interest received

on January 1 of each year. The bonds are classified in the held-to-maturity category.

Instructions

(a) Prepare the journal entry at the date of the bond purchase.

(b) Prepare the journal entry to record the interest revenue on December 31, 2017.

(c) Prepare the journal entry to record the interest received on January 1, 2018.

Question: Treasure Land Corporation incurred the following costs in 2017

Cost of laboratory research aimed at discovery of new knowledge

\(120,000

Cost of testing in search for product alternatives

\)100,000

Cost of engineering activity required to advance the design of a product to the manufacturing stage

\(210,000

\)430,000

Prepare the necessary 2017 journal entry or entries for Treasure Land.
See all solutions

Recommended explanations on Business Studies Textbooks

Accounting

Read Explanation

Strategy

Read Explanation

Public Relations Business Studies

Read Explanation

Actuarial Science in Business

Read Explanation

Human 91影视

Read Explanation

International 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.