91Ó°ÊÓ

Amortization of Intangible Assets alludes to the strategy under which the cost of the distinctive intangible assetsof the company (assets that don't have any physical existence, cannot be felt and touched like trademark, goodwill, patents, etc.) are expensed over the particular periodof time.

Calculation of amortization value 2016

$$\begin{gathered} \text{Amortization}\text{value}=\frac{\text{Legal}\text{costs}}{\text{Total}\text{years}} \\ =\frac{\$16,000}{10} \\ =\$1,600 \end{gathered}$$

The book value of amortization on 31/12/2017 is $14,400 ($\$16,000-\$1,600$)

Calculation of amortization value 2017

$$\begin{gathered} \text{Amortization}\text{value}=\frac{\text{Legal}\text{cost + Legal}\text{fees}}{\text{Total}\text{years}} \\ =\frac{\$14,400+\$7,800}{9} \\ =\frac{\$22,200}{9} \\ =\$2,467 \end{gathered}$$

The book value of amortization on 31/12/2017 is $19,733 ($\$14,400+\$7,800-\$2,467$)

Calculation of amortization value of 2017

$$\begin{gathered} \text{Amortization}\text{value}=\frac{\text{Legal}\text{cost}+\text{Legal}\text{fees}}{\text{Total}\text{years}} \\ =\frac{\$14,400+\$7,800}{4} \\ =\frac{\$22,200}{4} \\ =\$5,500 \end{gathered}$$

Book value on 12/31/17 is $16,650 ($\$14,400+\$7,800-\$5,500$)

Since the carrying value ($19,733) exceeds projected cash flows ($16,000), the trade name fails to pass the recoverability test. The new carrying value is $15,000, which is the fair market worth of the trade name.

2018 amortization (after recording impairment loss):

$$\begin{gathered} \text{Amortization}=\frac{\text{Fair}\text{value}}{\text{Total}\text{years}} \\ =\frac{\$15,000}{8} \\ =\$1,875 \end{gathered}$$

Book value on 12/31/18 is $13,125 ($\$15,000-\$1,875$)