Presented below is information related to copyrights owned by Walter de la Mare
ID: 2480952 • Letter: P
Question
Presented below is information related to copyrights owned by Walter de la Mare Company at December 31, 2014. Cost $8,553,800 Carrying amount 4,310,100 Expected future net cash flows 4,017,900 Fair value 3,389,400 Assume that Walter de la Mare Company will continue to use this copyright in the future. As of December 31, 2014, the copyright is estimated to have a remaining useful life of 10 years. Prepare the journal entry (if any) to record the impairment of the asset at December 31, 2014. The company does not use accumulated amortization accounts. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit Show List of Accounts Prepare the journal entry to record amortization expense for 2015 related to the copyrights. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit Show List of Accounts The fair value of the copyright at December 31, 2015, is $3,389,400. Prepare the journal entry (if any) necessary to record the increase in fair value. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit
Explanation / Answer
Walter De La Mare Details Amt $ Dec 31.2014. Copyright Carrying Value 4,310,100 PV of future net Cash flows 4,017,900 Fair value 3,389,400 Recoverable Amount = Higher of Fair Value and Net PV of future cash flows= 4017900 Carrying value > Recoverable amount. So there will be impairment . Impairment amount = Carrying Value less recoverable amount= 4310100-4017900= 292,200 Journal Entry Date Account Title Dr $ Cr $ Dec 31.2014. Asset (Impairment Allowance) 292,200 Impairment Loss (P/L) a/c = 292,200 Reduced Copyright value on Dec 31.2014.= 4,017,900 Remaining useful life = 10 years Amortization per year 401,790 Amortization for 2015 401,790 Journal Entry Date Account Title Dr $ Cr $ Dec 31.2015. Copyright 401,790 Impairment Expense 401,790 Carrying Value of copyright Dec31.2015. 3,616,110 FV of Copyright 3,389,400 No recording for increasing fair value not required. Further impairment decision cannot be determined as the future net cash flow is not available.