Question

1. Data related to the acquisition of timber rights and intangible assets during the current year ended December 31 are as follows:
2. 1. On December 31, the company determined that $1,090,000 of goodwill was impaired.
   2. Governmental and legal costs of $8,800,000 were incurred on September 30 in obtaining a patent with an estimated economic life of 10 years. Amortization is to be for one-fourth of a year.
   3. Timber rights on a tract of land were purchased for $1,600,000 on February 4. The stand of timber is estimated at 8,000,000 board feet. During the current year, 2,200,000 board feet of timber were cut and sold.

   Required:

   1. Determine the amount of the amortization, depletion, or impairment for the current year for each of the foregoing items. Do not round your intermediate calculation.

   Item	Impairment, Amortization or Depletion Expense
   a.	$
   b.	$
   c.	$

   Feedback

   Intangible assets with indefinite lives are tested annually for impairment. Intangible assets with definite lives are amortized using the straight-line method. The depletion rate stays constant.

   2. Journalize the adjusting entries required to record the amortization, depletion, or impairment for each item.

   a.	Loss on Impairment of Goodwill
   	Goodwill
   b.	Amortization Expense-Patents
   	Patents
   c.	Depletion Expense
   	Accumulated Depletion

Answer 1

Answer

1a Loss from Impairment of goodwill $ 1,090,000 1b Amortization of patent Patent Cost Economic Life of patent Amortization $ 8,800,000 10 Year $ 880,000 =8800000/10 1c $ Timber Right Purchase cost Stand of Timber Cost per board feet 16,000,000 8,000,000 board feet 2.00=16000000/8000000 $ No. of board feet sold 2,200,000 Depletion cost $ 4,400,000 =2200000.*2 Item Impairment, Amortization or Depletion Expense a. $ 1,090,000 b. $ 880,000 C $ 4,400,000

No. Credit 2 Journal entries as on 31st december Particulars Loss on Impairment of Goodwill To Goodwill (Being Goodwill impaired) Debit $ 1,090,000 a. $ 1,090,000 b. $ 880,000 Amortization Expense-Patents To Patents (Being Patent amortized) $ 880,000 c. $ 4,400,000 Depletion Expense To Accumulated Depletion (Depletion of timber right) $ 4,400,000

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