Requirements Intangible Assets a. Compute the impairment loss (if any) for each intangible asset. b. Prepare...

 
 

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Requirements Intangible Assets a. Compute the impairment loss (if any) for each intangible asset. b. Prepare the journal entry necessary to record the impairment loss. c. Assuming that SAR amortizes its finite-life intangible assets using the straight-line method, with no scrap value, prepare the joumal entry to record the annual amortization for the first year subsequent to the impairment write-down. Franchise Patent Trade name Print Done Step 1: Step 1 required? Franchise Yes Patent Yes Trade Name No Carrying value at year-end $ 859,000 $ Undiscounted future cash flows $ Impairment indicated 808,500 $ Yes 500,000 393,000 Yes Intangible Asset Net Carrying Value Remaining Life $ 859,000 5 years 500,000 3 years 3,954,000 N/A $ 5,313,000 Total SAR does not use a separate accumulated amortization account for the intangible assets (ie., it deducts the amount of amortization directly from the Intangible asset account). Print Done Now, complete step 2 of the impairment test for each intangible asset. Select whether step 2 of the test is required on the first line. (If the test is not required, leave all rema impairment loss input call blank in that column. Use the present value and future value tables, the formula method, a financial calculator, or a spreadsheet for your calculati places, X.XXXXXX. Round intermediary calculations and your final answers to the nearest whole dollar.) Step 2: Step 2 required Fair value at year-end Carrying value at year-end Impairment loss Franchise Yes Patent Yes Trade name Yes More Info Management provided the following information related to intangible assets it obtained during the current year: ⚫ Franchise: Due to current market conditions, products sold under the franchise have experienced significant sales declines from possible obsolescence. ⚫Patent: SAR is currently involved in litigation that will determine if the company has the exclusive right to sall the patented product. Legal counsel informed SAR that the value of the patent will likely be reduced. Trade name: The company is required to test for Impairment of its indefinite-life Intangible assets annually. SAR's cost of capital is 8%. Management estimates the following future cash flows to be generated over the next five years from the use of its intangible assets: Future Period Franchise Patent Trade Name Year 1 S 340,000 $ 282,000 $ 820,000 Year 2 280.000 95,000 710,000 Year 3 130.000 16,000 690,000 Year 4 49,000 0 550,000 29.500 D Year 5 388,000 S 808,500 $ 393,000 $ 3,138,000 Total Print Done Requirements Intangible Assets a. Compute the impairment loss (if any) for each intangible asset. b. Prepare the journal entry necessary to record the impairment loss. c. Assuming that SAR amortizes its finite-life intangible assets using the straight-line method, with no scrap value, prepare the joumal entry to record the annual amortization for the first year subsequent to the impairment write-down. Franchise Patent Trade name Print Done Step 1: Step 1 required? Franchise Yes Patent Yes Trade Name No Carrying value at year-end $ 859,000 $ Undiscounted future cash flows $ Impairment indicated 808,500 $ Yes 500,000 393,000 Yes Intangible Asset Net Carrying Value Remaining Life $ 859,000 5 years 500,000 3 years 3,954,000 N/A $ 5,313,000 Total SAR does not use a separate accumulated amortization account for the intangible assets (ie., it deducts the amount of amortization directly from the Intangible asset account). Print Done Now, complete step 2 of the impairment test for each intangible asset. Select whether step 2 of the test is required on the first line. (If the test is not required, leave all rema impairment loss input call blank in that column. Use the present value and future value tables, the formula method, a financial calculator, or a spreadsheet for your calculati places, X.XXXXXX. Round intermediary calculations and your final answers to the nearest whole dollar.) Step 2: Step 2 required Fair value at year-end Carrying value at year-end Impairment loss Franchise Yes Patent Yes Trade name Yes More Info Management provided the following information related to intangible assets it obtained during the current year: ⚫ Franchise: Due to current market conditions, products sold under the franchise have experienced significant sales declines from possible obsolescence. ⚫Patent: SAR is currently involved in litigation that will determine if the company has the exclusive right to sall the patented product. Legal counsel informed SAR that the value of the patent will likely be reduced. Trade name: The company is required to test for Impairment of its indefinite-life Intangible assets annually. SAR's cost of capital is 8%. Management estimates the following future cash flows to be generated over the next five years from the use of its intangible assets: Future Period Franchise Patent Trade Name Year 1 S 340,000 $ 282,000 $ 820,000 Year 2 280.000 95,000 710,000 Year 3 130.000 16,000 690,000 Year 4 49,000 0 550,000 29.500 D Year 5 388,000 S 808,500 $ 393,000 $ 3,138,000 Total Print Done

Answer rating: 100% (QA)

To compute the impairment loss we need to follow the twostep impairment test for each intangible asset Here are the calculations Step 1 Compare the ca... View the full answer