HW12Q5 - HW-Ch 12 Q5) 1. Trademark – Intangible asset...

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Unformatted text preview: HW-Ch 12 Q5) 1. Trademark – Intangible asset with indefinite life - No amortization - Impairment test (Fair value test) Fair value (Present value of infinite annuity) 1,000 / 0.06 = 16,667 Carrying value = 30,000 Dr. Loss on impairment – Trademark Cr. Trademark 13,333 13,333 2. Goodwill - No amortization - Two step – fair value impairment test - Step 1: Fair value of reporting unit vs. Carrying value of reporting unit 1) Carrying value of reporting unit = 270,000 + 150,000 – 180,000 = 240,000 2) Fair value of reporting unit (PV of fair value) = 25,000 * PV factor of ordinary annuity (i = 0.06, n = 22) = 301,040 Because carrying value of reporting unit is greater than fair value, goodwill is not impaired. 3. Customer list – Intangible asset with limited life - Two steps impairment test - Periodic amortization 1) Impairment test Carrying value = 22,000 (Undiscounted) Sum of future cash flows = 12,000 + 8,000 = 20,000 Since the future cash flows can not recover the carrying value, the customer list is impaired Fair value = 12,000 / (1.06) + 8,000 / (1.06)*(1.06) = 18,440 The impairment loss of the customer list = 20,000 – 18,440 = 3,560 Dr. Impairment loss 3,560 Cr. Customer list 3,560 2) Amortization (22,000 – 3,560) / 3 years = 6,146 Dr. Amortization 6,146 Cr. Customer list 6,146 ...
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This note was uploaded on 04/09/2010 for the course ACC 5110 taught by Professor Lee during the Winter '10 term at Wayne State University.

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