Instructions Data related to the acquisition of timber rights and intangible ass
ID: 2538359 • Letter: I
Question
Instructions Data related to the acquisition of timber rights and intangible assets during the current year ended December 31 are as follows: A. Timber rights on a tract of land were purchased for $3,180,540 on February 22. The stand of timber is estimated at 5,214,000 board feet. During the current year, 1,125,600 board feet of timber were cut and sold. B. On December 31, the company determined that $4,023,000 of goodwill was impaired. C. Governmental and legal costs of $6,720,000 were incurred on April 3 in obtaining a patent with an estimated economic life of 12 years. Amortization is to be for three-fourths of a year. Required: 1. Determine the amount of the amortization, depletion, or impairment for the current year for each of the foregoing items. 2. Journalize the adjusting entries required to record the amortization, depletion, or impairment for each item. Refer to the Chart of Accounts for exact wording of account titles.Explanation / Answer
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1 Amortization Patent Cost 6720000 Life 12 Year Annual Amortization Patent Cost/Life 560000 Since to be amortized only 3/4 in current year (Given in question). Amortization will be 560000*3/4 420000 Depletion Total Board Fee 5214000 Purchased at $ 3180540 Cut and Sold 1125600 Hence Depletion is 3180540/5214000*1125600= $686616 Amortization 420000 Depletion 686616 Impairment (given in question) 4023000