Presented below is information related to copyrights owned by Ivanhoe Company at
ID: 2508580 • Letter: P
Question
Presented below is information related to copyrights owned by Ivanhoe Company at December 31, 2017.
Cost $8,660,000
Carrying amount 4,310,000
Expected future net cash flows 3,950,000
Fair value 3,330,000
Assume that Ivanhoe Company will continue to use this copyright in the future. As of December 31, 2017, the copyright is estimated to have a remaining useful life of 10 years.
Prepare the journal entry to record the impairment of the asset at December 31, 2017. 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
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Prepare the journal entry to record amortization expense for 2018 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
LINK TO TEXT
The fair value of the copyright at December 31, 2018, is $3,640,000. Prepare the journal entry 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
1) Journal entry to record impairment of assets as at 31st Dec 2017
Loss on impairment A/c Dr $980,000
Copyright A/c Cr $980,000
Working :- Carrying Value = $4,310,000
Fair Value = $3,330,000
Impairment loss on copyright= $4,310,000-$3,330,000= $980,000
2) Journal entry to record amortization expense for year 2018
Amortization expense A/c Dr $333,000
Copyright expense A/c Cr $333,000
Working:
New Carrying value $3,330,000
Useful life 10 years
Amortization expense each year =$3,330,000/10 year =$333,000
3) No entry necessary. Restoration of any impairment loss is not permitted as per US Gaap for asset held for future use. This is because the asset has a new cost basis after the recording of impairment loss and reversal/restoration of a previous recorded impairment loss is not allowed.