Question

In early 2018, Bowen Company acquired a new business unit in a merger. Allocation of the acquisition cost resulted in fair values assigned as follows: Intangible Asset Fair Value Estimated Value Customer lists $500,000 5 years Developed technology 800,000 10 years Internet domain name 1,300,000 Indefinite Goodwill* 6,200,000 Indefinite * The goodwill is assigned entirely to the acquired business unit. Impairment reviews at the end of 2018 and 2019 did not identify any impairment losses. After the business suffered a downturn during 2020, the year-end impairment review yielded the following information: Customer lists are estimated to have undiscounted future cash flows of $250,000 and discounted future cash flows of $180,000. Developed technology is estimated to have undiscounted future cash flows of $500,000 and discounted future cash flows of $420,000. The internet domain name is estimated to have undiscounted future cash flows of $1,000,000 and discounted future cash flows of $750,000. Qualitative assessment indicates that it is more likely than not that the internet domain name is impaired Because of the economic downturn, Bowen bypassed qualitative assessment of the business unit. The acquired business unit has a fair value of $17,000,000, and a carrying amount of $18,500,000. Required Determine Bowen’s amortization expense and impairment write-offs for 2020, following U.S. GAAP. Summary: Amortization expense for 2020: Customer lists 100,000 Developed technology 80000 Total 180000 Impairment write offs for 2020: Developed technology $Answer Internet domain name 550000 Goodwill 1500000 Total $Answer

Answer 1

Particulars Amortization expense for 2020: Customers lists Developed technolo Total Impairment write offs for 2020: Developed technolo Internet domain Goodwill Total Amount S 100,000.00 (500000/5) $ 80,000.00 (800000/10 $ 180,000.00 $ 140,000.00 (560000-420000) $ 550,000.00 (1300000-750000) 1,500,000.00 $2,190,000.00 Impairment write offs for 2020: Developed technolo Less: Amortization Expense (80,000*3 Years) $ (240,000.00 Discounted future cash flows $ 800,000.00 S (420,000.00 $ 140,000.00