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What are the audit implications of these figures? (2 marks)

b. Identify four key audit procedures that you would perform to address the issues you identified in part a). (4 marks)


P12-8 Meridan Golf and Sports was formed on July 1, 2017, when Steve Powerdriver purchased Old Master Golf
Corporation. Old Master provides video golf instruction at kiosks in shopping malls. Powerdriver's plan is to make the
instruction business part of his golf equipment and accessory stores. Powerdriver paid $650,000 cash for Old Master. At
the time of purchase, Old Master's balance sheet reported assets of $550,000 and liabilities of $100,000 (shareholders'
equity was $450,000). The fair value of Old Master's identifiable assets was estimated to be $700,000. Included in the
identifiable assets was the Old Master trade name with a fair value of $15,000 and a copyright on some instructional
books with a fair value of $25,000. The trade name had a remaining legal life of five years and can be renewed indefi-
nitely at nominal cost. The copyright had a remaining life of 40 years.
Assume that Meridan Golf and Sports is a private company reporting under ASPE.
(a) Prepare the intangible assets section of Meridan Golf and Sports at December 31, 2017. How much amortization
expense is included in Meridan's income for the year ended December 31, 2017? Show all supporting calculations.
(b) Prepare the journal entry to record the amortization expense for 2018. Prepare the intangible assets section of
-nem of is
Meridan Golf and Sports at December 31, 2018. (No impairment needs to be recorded in 2018.)
2issy 01 1(c) At the end of 2019, Powerdriver is evaluating the results of the instructional business. Due to fierce competition
from Internet sites and television, the Old Master reporting unit has been losing money and has a carrying amount
including goodwill) of $450,000 and fair value (including goodwill) of $430,000.
Powerdriver has collected the following information about the company's intangible assets:
Expected Cash Flows berg s
goloved 36 000
Intangible Asset
bas ins
Fair Value
nem) 238,690
090, 18
Trade name
noo bus 160 $ 8,000
Prepare the required journal entries, if any, to record impairment on Meridan's intangible assets. (Assume that amorti-
zation for 2019 has been recorded.) Show supporting calculations.
P12-9 Use the data provided in P12-8. Assume instead that Meridan Golf and Sports is a public company. The rele-
vant information for the impairment test on December 31, 2019, is as follows:
b juber
bus astin smoopos ovig ouye s 105 fe -Carrying
Future Net s vode emon sch bluords woth(e) for distinct
Cash Flows one bris
(Undiscounted) in Use
FV-Selling Costs
3sex Trade name
$ 15,000
$ 11,000
l blow
$ 7,000
oil on$ 7,500
Cash-generating unit to which
goodwill was allocated
151 450,0009 470,000
groon 440,000
CIOSinLen 420,000 types of
moit 210 Instructions
sorodT .a
5 812 do sor noitemsigan saobyalty basis.
Provide the calculations for the impairment test and any associated journal entry. onlarger boombonds

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