Question $1$: Intangible Assets & Impairment

A technology company acquired a patent for a cutting$-$edge software application five years ago for $$2$ million. The patent was considered to have a $10-$year useful life with no residual value. The company has been aggressively marketing the software, generating significant revenues.

Recently, a major competitor introduced a similar and more advanced product, rendering the company's software less desirable in the market. Management believes the fair value of the patent has declined significantly, but there's no active market to determine a precise value.

The company uses a discounted cash flow model to estimate the patent's fair value. Key assumptions include a $3-$year remaining useful life, projected cash inflows declining by $30\%$ annually, and a discount rate of $12\%.$

Tasks:

Explain the concept of intangible asset impairment and the circumstances that trigger an impairment test.

Perform the impairment test calculations and determine if an impairment loss must be recorded.

If an impairment is necessary, prepare the journal entry and calculate the revised amortizatioKindly do not provide chat gpt answers, posting this question $3$rd time here. If feel the question is from chatgpt and copied from any other source,

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