Demonstration Problem $675$

DEMONSTRATION PROBLEM

Sky Co$.,$ organized in $2014,$ provided you with the following information.

Purchased a license for $$20,000$ on July $1,2014.$ The license gives Sky exclusive rights to sell its services in the tri$-$state region and will expire on July $1,2022.$

Purchased a patent on January $2,2015,$ for $$40,000.$ It is estimated to have a $5-$year life.

Costs incurred to develop an exclusive Internet connection process as of June $1,2015,$ were $$45,000.$ The process has an indefinite life.

On April $1,2015,$ Sky Co$.$ purchased a small circuit board manufacturer for $$350,000.$ Goodwill recorded in the transaction was $$90,000.$

On July $1,2015,$ legal fees for successful defense of the patent purchased on January $2,2015,$ were $$11,400.$

Research and development costs incurred as of September $1,2015,$ were $$75,000.$

Instructions

$($a$)$ Prepare the joumal entries to record all the entries related to the patent during $2015.$

$($b$)$ At December $31,2015,$ an impairment test is performed on the license purchased in $2014.$ It is estimated that the net cash flows to be received from the license will be $$13,000,$ and its fair value is $$7,000.$ Compute the amount of impairment, if any, to be recorded on December $31,2015.$

$($c$)$ What is the amount to be reported for intangible assets on the balance sheet at December $31,2014?$ At December $31,2015?$