Question

On January 2, 2020, Cheyenne Corp. reported the following intangible assets: (1) copyright with a carrying value of $23,000, and (2) a trade name with a carrying value of $8,800. The trade name has a remaining life of 5 years and can be renewed at nominal cost indefinitely. The copyright has a remaining life of 10 years.

On January 2, 2020, Cheyenne Corp. reported the following intangible assets: (1) copyright with a carrying value of $23,000, and (2) a trade name with a carrying value of $8,800. The trade name has a remaining life of 5 years and can be renewed at nominal cost indefinitely. The copyright has a remaining life of 10 years. At December 31, 2020, Cheyenne assessed the intangible assets for possible impairment and developed the following information. Estimated Undiscounted Expected Future Cash Flows $30,000 10,300 Copyright Trade name Estimated Fair Value $24,400 6,800 Prepare any journal entries required for Cheyenne's intangible assets at December 31, 2020. (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 for the amounts.) Debit Credit Date Account Titles and Explanation Dec. 31 Amortization Expense Copyrights (To record amortization expense) Dec. 31 (To record loss on impairment)

Answer 1

1. Journal Entries to record amortization exp.:

Amortization exp A/c.------------Dr. 2300

To Copyright A/c. 2300

Amortization exp A/c.------------Dr. 1760

To Trade Name A/c. 1760

2. Journal Entry to record loss on impairment:

a. Recoverability Test: Estimated undiscounted future cash flows of Copyrights Rs. 30000 are more than it's carrying value 23000 ; Measurement Test: Estimated fair value of Copyright 24400 is more than it,s carrying value 23000, so there is no impairment in case of copyrights.

b. Recoverability Test: Estimated undiscounted future cash flows of Trade name Rs. 10300 are more than it's carrying value 8800, entities cannot record an impairment for a held and used asset unless the asset first fails this recoverability test. So there is no impairment in case of Trade name.