Question

1. Shermann Printers incurred external costs of $1,500,000 for a patent for a new laser printer. Although the patent gives legal protection for 20 years, it is expected to provide Shermann Printers with a competitive advantage for only 15 years. Assuming the straight-line method of amortization, make journal entries to record (a) the purchase of the patent and (b) amortization for year 1.
2. After using the patent for 10 years, Shermann Printers learns at an industry trade show that Fast Printers is designing a more efficient printer. On the basis of this new information, Shermann Printers determines that the expected future cash flows from the patent are only $400,000. Its fair value on the open market is zero. Is this asset impaired? If so, make the impairment adjusting entry.



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  • CreatedJuly 25, 2014
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