Exercise 12-13 Presented below is information related to copyrights owned by Pha
ID: 2330741 • Letter: E
Question
Exercise 12-13
Presented below is information related to copyrights owned by Pharoah Company at December 31, 2017.
Assume that Pharoah Company will continue to use this copyright in the future. As of December 31, 2017, the copyright is estimated to have a remaining useful life of 10 years.
Prepare the journal entry to record the impairment of the asset at December 31, 2017. The company does not use accumulated amortization accounts. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Prepare the journal entry to record amortization expense for 2018 related to the copyrights. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
The fair value of the copyright at December 31, 2018, is $3,470,000. Prepare the journal entry necessary to record the increase in fair value. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Cost $8,560,000 Carrying amount 4,390,000 Expected future net cash flows 4,080,000 Fair value 3,320,000 Account Titles and Explanation Debit CreditExplanation / Answer
SOLUTION
Explanation-
1. Loss on Impairment = Carrying value - Fair value
= $4,390,000 - $3,320,000 = $1,070,000
2. Amortization expense = (Carrying amount - Loss on impaiment) / Useful Life
= ($4,390,000 - $1,070,000) / 10 years = $332,000
Date Accounts titles and Explanation Debit ($) Credit ($) Dec. 31, 2017 Loss on Impairment 1,070,000 Copyrights 1,070,000 (To record the loss on impairment of copyrights) Dec.31, 2018 Amortization expense 332,000 Copyrights 332,000 (To rceord the amortozation on copyrights) Dec.31, 2018 No entryRelated Questions
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