SAS Computers owns a patent on a computer processor. The processor was developed and capitalized at a cost of €2,030,000 in the beginning of 2015. It was expected to be economically useful for 7 years and have no residual value. At the beginning of 2018, a new processor was developed, making the old processor worth €850,000 (independent appraiser) with €50,000 total cost to sell. The present value of the processor’s future cash flows, given the development of the newer processor, is estimated to be €870,000. At this point, it is expected to have a useful life of 4 years with no residual value. Is the processor impaired in 2018? If it is impaired, prepare the journal entry to record the loss. Also prepare the journal entry for amortization in 2018. Show your work. How much is the patent worth at the end of 2018?

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To determine if the processor is impaired in 2018 we need to compare the carrying amount of the proc... View the full answer