Test bank for intermediate accounting twelfth edition

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Test Bank for Intermediate Accounting, Twelfth Edition
b. The $550,000 difference should be recognized as an extraordinary gain.
c. The current assets should be recorded at $375,000 and the noncurrent assets should
be recorded at $875,000.
d. A deferred credit of $550,000 should be set up and then amortized to income over a
period not to exceed forty years.
66. The following information is available for Barkley Company’s patents:
Cost $1,720,000
Carrying amount 860,000
Expected future net cash flows 800,000
Fair value 640,000
Barkley would record a loss on impairment of
67. Mining Company acquired a patent on an oil extraction technique on January 1, 2006 for
$5,000,000. It was expected to have a 10 year life and no residual value. Mining uses
straight-line amortization for patents. On December 31, 2007, the expected future cash
flows expected from the patent were expected to be $600,000 per year for the next eight
years. The present value of these cash flows, discounted at Mining’s market interest rate,
is $2,800,000. At what amount should the patent be carried on the December 31, 2007
balance sheet?
68. Malrom Manufacturing Company acquired a patent on a manufacturing process on
January 1, 2006 for $10,000,000. It was expected to have a 10 year life and no residual
value. Malrom uses straight-line amortization for patents. On December 31, 2007, the
expected future cash flows expected from the patent were expected to be $800,000 per
year for the next eight years. The present value of these cash flows, discounted at
Malrom’s market interest rate, is $4,800,000. At what amount should the patent be carried
on the December 31, 2007 balance sheet?
69. Twilight Corporation acquired End-of-the-World Products on January 1, 2008 for
$2,000,000, and recorded goodwill of $375,000 as a result of that purchase. At December
31, 2008, the End-of-the-World Products Division had a fair value of $1,700,000. The net
identifiable assets of the Division (excluding goodwill) had a fair value of $1,450,000 at
that time. What amount of loss on impairment of goodwill should Twilight record in 2008?
a. $ -0-
b. $125,000
c. $175,000
d. $300,000