Question

Presented below is information related to copyrights owned by Sandhill Company at December 31, 2020. Cost $8,690,000 Carrying amount 4,470,000 Expected future net cash flows 3,950,000 Fair value 3,350,000 Assume that Sandhill Company will continue to use this copyright in the future. As of December 31, 2020, 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, 2020. The company does not use accumulated amortization accounts. Prepare the journal entry to record amortization expense for 2021 related to the copyrights. The fair value of the copyright at December 31, 2021, is $3,550,000. Prepare the journal entry necessary to record the increase in fair value.

Answer 1

No.	Date	Accounts	Debit	Credit
(a)	December 31, 2020	Loss on Impairment	$1120000
		Copyright (4470000 - 3350000)		$1120000
(b)	Year 2021	Amortization expenses	$335000
		Copyright (3350000 / )		$335000
(c)	No entry will be passed to record increase in the fair value of copyright.