Asked by Brandon McMahon on Jun 18, 2024
Verified
On December 31, it was estimated that goodwill of $65,000 was impaired. On July 1, a patent with an estimated useful economic life of 10 years was acquired for $60,000.
(a)Journalize the adjusting entry on December 31 for the impaired goodwill.
(b)Journalize the adjusting entry on December 31 for the amortization of the patent rights.
Impaired Goodwill
The decrease in the value of a company's goodwill, often due to adverse changes in the business or market conditions, requiring a write-down in accounting.
Amortization
The practice of systematically depreciating the initial cost of an intangible asset over its life span.
Economic Life
The estimated period over which an asset is expected to be productive or useful in generating revenue.
- Document and comprehend the consequences of asset devaluation, specifically in relation to goodwill impairment.
- Process and register the charges of depreciation, depletion, and amortization.
Verified Answer
(b) Amortization Expense-Patents 3,000 Patents 3,000\begin{array} { | c | r | r | } \hline \text { Amortization Expense-Patents } & 3,000 & \\\hline \text { Patents } & & 3,000 \\\hline\end{array} Amortization Expense-Patents Patents 3,0003,000
Annual Patent Amortization = Acquisition Cost/Useful Life = $60,000/10 = $6,000 Amortization expense from July 1 to December 31 = $6,000/2 = $3,000
Learning Objectives
- Document and comprehend the consequences of asset devaluation, specifically in relation to goodwill impairment.
- Process and register the charges of depreciation, depletion, and amortization.
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