Jung inc owns a patent for which it paid 66 million

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77. Jung Inc. owns a patent for which it paid $66 million. At the end of 2013, it had accumulated amortization on the patent of $16 million. Due to adverse economic conditions, Jung's management determined that it should assess whether an impairment loss should be recognized for the patent. The estimated undiscounted future cash flows to be provided by the patent total $43 million, and the patent's fair value at that point is $35 million. Under these circumstances, Lester: A. Would record no impairment loss on the patent. B. Would record a $7 million impairment loss on the patent. C. Would record a $15 million impairment loss on the patent. D. Would record a $31 million impairment loss on the patent. The patent fails the recoverability test, and the impairment is measured by the difference between its fair value of $35 million and its book value of $50 million ($66 million - 16 million). AACSB: Analytic AICPA FN: Measurement Blooms: Apply Difficulty: 3 Hard Learning Objective: 11-08 Identify situations that involve a significant impairment of the value of property; plant; and equipment and intangible assets and describe the required accounting procedures. Spiceland - Chapter 11 #77 Topic: Identify situations that involve a significant impairment of the value of PP & E and intangible assets and describe the required accounting procedures
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78. In 2012, Antle Inc. had acquired Demski Co. and recorded goodwill of $245 million as a result. The net assets (including goodwill) from Antle's acquisition of Demski Co. had a 2013 year- end book value of $580 million. Antle assessed the fair value of Demski at this date to be $700 million, while the fair value of all of Demski's identifiable tangible and intangible assets (excluding goodwill) was $550 million. The amount of the impairment loss that Antle would record for goodwill at the end of 2013 is: An impairment loss must be recognized if book value of the reporting unit acquired exceeds it fair value. In this case, it does not, so no impairment loss is recognized. AACSB: Analytic AICPA FN: Measurement Blooms: Apply Difficulty: 3 Hard Learning Objective: 11-08 Identify situations that involve a significant impairment of the value of property; plant; and equipment and intangible assets and describe the required accounting procedures. Spiceland - Chapter 11 #78 Topic: Identify situations that involve a significant impairment of the value of PP & E and intangible assets and describe the required accounting procedures
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