Repeat E12-13, but now assume that the licence was granted in perpetuity and has an indefinite life.

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Repeat E12-13, but now assume that the licence was granted in perpetuity and has an indefinite life.
In exercise
At the end of 2014, Dayton Corporation owns a licence with a remaining life of 10 years and a carrying amount of $530,000. Dayton expects undiscounted future cash flows from this licence to total $535,000. The licence's fair value is $425,000 and disposal costs are estimated to be nil. The licence's discounted cash flows (that is, value in use) are estimated to be $475,000. Dayton prepares financial statements in accordance with IFRS.
Instructions
(a) Determine if the licence is impaired at the end of 2014 and prepare any related entries that are necessary.
(b) Assume the recoverable amount is calculated to be $450,000 at the end of 2015. Determine if the licence is impaired at the end of2015 and prepare any related entries that are necessary.
(c) Explain how the answer to part (b) would change if the licence's fair value is $500,000 at the end of 2015. Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
Discounted Cash Flows
What is Discounted Cash Flows? Discounted Cash Flows is a valuation technique used by investors and financial experts for the purpose of interpreting the performance of an underlying assets or investment. It uses a discount rate that is most...
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Perpetuity
Perpetuity refers to payments that are made without an end or maturity date. A perpetuity is classified as an annuity, which is something that earns a dividend or receives a payment at a regularly scheduled interval, generally yearly. So, how...
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Related Book For  book-img-for-question

Intermediate Accounting

ISBN: 978-0176509736

10th Canadian Edition, Volume 1

Authors: Donald Kieso, Jerry Weygandt, Terry Warfield, Nicola Young,

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