Question

Presented below is information related to copyrights owned by Taylor Corporation at
December 31, 2020.
Carrying amount     7,000,000
Expected future net cash flows   6,200,000
Fair value    3,300,000
Assume Taylor will continue to use this asset in the future. As of December 31, 2020,
the copyrights have a remaining useful life of 5 years.
Instructions
(a) Prepare the journal entry (if any) to record the impairment of the asset at
December 31, 2020.
(b) Prepare the journal entry to record amortization expense for 2021.
(c) The fair value of the copyright at December 31, 2021 is $3,400,000. Prepare the
journal entry, under GAAP, necessary to record this increase in fair value.

Answer 1

a
	Debit	Credit
Loss on impairment	3700000
Copyrights		3700000
b
	Debit	Credit
Amortization expense	660000
Copyrights		660000
c
	Debit	Credit
No entry	0
No entry		0
Workings:
Carrying Amount	7000000
Less: Fair value	3300000
Loss on impairment	3700000
Revised Carrying amount	3300000
Divide by Remaining life	5
Amortization expense for 2021	660000
Restoration of impairment loss is not permitted under GAAP. No entry is required to record increase in fair value.