Shamrock Industries had one patent recorded on its books as of January 1, 2017.

Question

Shamrock Industries had one patent recorded on its books as of January 1, 2017. This patent had a book value of $316,800 and a remaining useful life of 8 years. During 2017, Shamrock incurred research and development costs of $93,000 and brought a patent infringement suit against a competitor. On December 1, 2017, Shamrock received the good news that its patent was valid and that its competitor could not use the process Shamrock had patented. The company incurred $119,000 to defend this patent. At what amount should patent(s) be reported on the December 31, 2017, balance sheet, assuming monthly amortization of patents?

Pronghorn Corporation purchased Johnson Company 3 years ago and at that time recorded goodwill of $300,000. The Johnson Division’s net assets, including the goodwill, have a carrying amount of $750,000. The fair value of the division is estimated to be $690,000 and the implied goodwill is $240,000.

Prepare Pronghorn journal entry to record impairment of the goodwill. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation

Debit

Credit

Explanation / Answer

Question 1

The amount to be reported - 394800

(316800-(316800/8))+ (119000-(1/85*119000))

277200+117600 = 394800

Question 2

Loss on impairment Dr. 240000

Goodwill cr. 2400000

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