In the last quarter of 2014, DreamWorks Animation SKG Inc. recorded a loss. Part of this...

 

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In the last quarter of 2014, DreamWorks Animation SKG Inc. recorded a loss. Part of this loss was due to impairment charges. In their annual report the company stated: We are required to amortize capitalized production costs over the expected revenue streams as we recognize revenue from the associated films or other projects. The amount of production costs that will be amortized each quarter depends on, among other things, how much future revenue we expect to receive from each project. Unamortized production costs are evaluated for impairment each reporting period on a project-by- project basis. If estimated remaining revenue is not sufficient to recover the unamortized production costs, the unamortized production costs will be written down to fair value. In any given quarter, if we lower our previous forecast with respect to total anticipated revenue from any individual feature film or other project, we may be required to accelerate amortization or record impairment charges with respect to the unamortized costs, even if we have previously recorded impairment charges for such film or other project. For instance, in the quarter ended December 31, 2013, we incurred a write-down of $13.5 million for our film Turbo and in the year ended December 31, 2014, we incurred write-downs of $66.5 million for our film Mr. Peabody and Sherman and $30.3 million for our film The Penguins of Madagascar. Such impairment charges adversely impacted our business, operating results and financial condition. REQUIRED DreamWorks reported an $86.2 million pre-tax loss for the year 2014. What would pre-tax income or loss have been without the above described impairment charges? b. DreamWorks is in the film production/media industry. From the paragraph above, describe how companies in this industry account for their film production costs - when incurred and over time. c. Show the journal entry for 2014 to record the impairment charges related to Mr. Peabody and Sherman and The Penguins of Madagascar. In the last quarter of 2014, DreamWorks Animation SKG Inc. recorded a loss. Part of this loss was due to impairment charges. In their annual report the company stated: We are required to amortize capitalized production costs over the expected revenue streams as we recognize revenue from the associated films or other projects. The amount of production costs that will be amortized each quarter depends on, among other things, how much future revenue we expect to receive from each project. Unamortized production costs are evaluated for impairment each reporting period on a project-by- project basis. If estimated remaining revenue is not sufficient to recover the unamortized production costs, the unamortized production costs will be written down to fair value. In any given quarter, if we lower our previous forecast with respect to total anticipated revenue from any individual feature film or other project, we may be required to accelerate amortization or record impairment charges with respect to the unamortized costs, even if we have previously recorded impairment charges for such film or other project. For instance, in the quarter ended December 31, 2013, we incurred a write-down of $13.5 million for our film Turbo and in the year ended December 31, 2014, we incurred write-downs of $66.5 million for our film Mr. Peabody and Sherman and $30.3 million for our film The Penguins of Madagascar. Such impairment charges adversely impacted our business, operating results and financial condition. REQUIRED DreamWorks reported an $86.2 million pre-tax loss for the year 2014. What would pre-tax income or loss have been without the above described impairment charges? b. DreamWorks is in the film production/media industry. From the paragraph above, describe how companies in this industry account for their film production costs - when incurred and over time. c. Show the journal entry for 2014 to record the impairment charges related to Mr. Peabody and Sherman and The Penguins of Madagascar.

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Answer a Pretax income would have been 135 million without the ... View the full answer