Meridan Golf and Sports was formed on July 1, 2014, when Steve Powerdriver purchased Old Master Golf Corporation. Old Master provides video golf instruction at kiosks in shopping malls. Powerdriver's plan is to make the instruction business part of his golf equipment and accessory stores. Powerdriver paid $650,000 cash for Old Master. At the time of purchase, Old Masters balance sheet reported assets of $550,000 and liabilities of $100,000 (shareholders' equity was $450,000). The fair value of Old Master's identifiable assets was estimated to be $700,000. Included in the identifiable assets was the Old Master trade name with a fair value of $15,000 and a copyright on some instructional books with a fair value of $25,000. The trade name had a remaining legal life of five years and can be renewed indefinitely at nominal cost. The copyright had a remaining life of 40 years.
Assume that Meridan Golf and Sports is a private company reporting under ASPE.
(a) Prepare the intangible assets section of Meridan Golf and Sports at December 31, 2014. How much amortization expense is included in Meridan~ income for the year ended December 31, 2014? Show all supporting calculations.
(b) Prepare the journal entry to record the amortization expense for 2015. Prepare the intangible assets section of Meridan Golf and Sports at December 31, 2015. (No impairment needs to be recorded in 2015.)
(c) At the end of 2016, Powerdriver is evaluating the results of the instructional business. Due to fierce competition from Internet sites and television, the Old Master reporting unit has been losing money and has a carrying amount (including goodwill) of $450,000 and fair value (including goodwill) of $430,000.
Powerdriver has collected the following information about the company's intangible assets:
Prepare the required journal entries, if any, to record impairment on Meridan's intangible assets. (Assume that amortization for 2016 has been recorded.) Show supporting calculations.

  • CreatedSeptember 18, 2015
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