Question: A10 20 Asset Impairment Sotsweat Incorporated is a software development
A10- 20 Asset Impairment: Sotsweat Incorporated is a software development company. It has several products on the market, including the widely used PlayMark animation software. he cash flows from PlayMark are clearly distinguishable within Sotsweat. he company has recorded development costs of $ 2.8 million relating to PlayMark, which is being amortized on a straight- line basis over seven years. At the end of 20X5, the carrying value was $ 1,960,000. Sotsweat maintains a separate account for accumulated amortization on PlayMark. In 20X5, a large U. S. company, Macrosotie, released a competing product that has been hailed as a substantial improvement over PlayMark. However, the competing product requires installation of a great deal of additional Macrosotie software to make the new product run deficiently. In addition, the high price may delay its acceptance by some users. Because of the new competition, Sotsweat management decided that an impairment test should be made. In January 20X6, as the 20X5 financial statements were being prepared, the company hired a professional business valuator. he valuator’s appraisal was that the fair value of PlayMark at the end of 20X5 was $ 1,000,000. Required: 1. Prepare the necessary adjusting journal entry to record the results of the impairment test. 2. Suppose that in 20X6, the Macrosotie product was found to be unreliable and that the sales of PlayMark returned to almost their 20X4 level. he fair value of PlayMark there-fore was $ 1,600,000 at the end of 20X6. How ( if at all) would this change be recorded in Sotsweat’s financial statements for 20X6?
Answer to relevant QuestionsZoe Incorporated has a large piece of machinery where management has assessed and determined there is potential impairment. This piece of machinery has independent cash inflows. The following information relates to the ...Comprehensive Long- lived Asset Transactions and Depreciation: MH Plumbing Incorporated (MH) is the largest plumbing contractor in Moncton, Alberta. Information on selected transactions/ events is given below: a. On 15 ...How are the components determined? Describe the steps followed to determine whether there has been an impair-ment of a long- lived asset.On 1 August 20X4, Baker Company purchased $ 50,000 face amount of Sugar Company 6% coupon value bonds for $ 43,200. The market interest rate was 8% on this date. The bond pays interest semi- annually on 31 July and 31 ...
Post your question