this helps on this case Chapter 12 Intangible Assets Accounting, Analysis, and P
ID: 2456542 • Letter: T
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this helps on this case
Chapter 12 Intangible Assets Accounting, Analysis, and Principles On January 2, 2014, Raconteur Corp. reported the following intangible assets: (1) copyright with carrying valne of S15,000, and (2) a trade name with a carrying value of $8,500. The trade name ha remaining life of 5 years and can be renewed at nominal cost indefinitely. The copyright has a remain life of 10 years. At December 31, 2014, Raconteur assessed the intangible assets for possible impairment and develope the following information. Estimaterd Undiscounted Expected Future Cash Flows $20,000 10,000 Estimated Fair Value $16,000 Copyright Trade name 5,000 Prepare any jounal entries required for Raconteur's intangible assets at December 31, 2014. Anaysis Many stock analysts indicate a preference for less-volatile operating income measures. Such measures maie it easier to predict future income and cash flows, using reported income measures. How does the accouniting for impairments of intangible assets affect the volatility of operating income? Principles Many accounting issues involve a trade-off between the primary characteristics of relevant and represen- tationally ietthful information. How does the accounting for intangible asset impairments reflect this BRIDGE TO THE PROFESSION Research: FASB Codification the purchase of e smaller company mhichExplanation / Answer
1 Carrying amount of Trademark $8500
Fair Value of copyright $5000
Loss on Impairment $3500
December 31 Loss on Impairment a/c 3500
Trademark 3500
For copyright there is no impairment because fair value is more than carrying amount
2) The current income statement will include an impairment loss in income before tax from continuing operations. Net income will also be lower. So there is increase in volatility of income. Future net income will be higher as there will be lower asset value.
3) Recognition of elements of financial reports is subjected to decisions about trade offs between relevance and reliability. This decision is generally decided on proof and the verifiability of the element. The professional acceptance for providing evidence that investment in research and development, trademark, copyright and other intangibles meet the definition for classification as assets and the criteria for measurement.The company uses conclusions from relevant source.Market reaction is another professionally accepted medium for providing evidence
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