8. At the beginning of 2020, Howie Company acquired an intangible asset for P3,000,000. The intangible asset has an estimated useful life of ten(10) years. At year-end, Dec. 31, 2020, the intangible asset was evaluated to determine whether it was impaired. On the same date, the fair value less cost of disposal of the intangible asset is P2,500,000. The asset is expected to generate future cash flows of P300,000 annually for the remaining nine(9) years. The appropriate discount rate is 5%. What is the impairment loss to be recognized for 2020?

8. At the beginning of 2020, Howie Company acquired an intangible asset for P3,000,000. The intangible asset has an estimated useful life of ten(10) years. At year-end, Dec. 31, 2020, the intangible asset was evaluated to determine whether it was impaired. On the same date, the fair value less cost of disposal of the intangible asset is P2,500,000. The asset is expected to generate future cash flows of P300,000 annually for the remaining nine(9) years. The appropriate discount rate is 5%. What is the impairment loss to be recognized for 2020?

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter12: Intangibles

Section: Chapter Questions

Problem 1MC: What is the proper time or time period over which to amortize an intangible asset if there is no...

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The following intangible assets were purchased by Hanna Unlimited: A. A patent with a remaining legal life of twelve years is bought, and Hanna expects to be able to use it for six years. It is purchased at a cost of $48,000. B. A copyright with a remaining life of thirty years is purchased, and Hanna expects to be able to use it for ten years. It is purchased for $70,000. Determine the annual amortization amount for each intangible asset.
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The following intangible assets were purchased by Goldstein Corporation: A. A patent with a remaining legal life of twelve years is bought, and Goldstein expects to be able to use it for seven years. B. A copyright with a remaining life of thirty years is purchased, and Goldstein expects to be able to use it for ten years. For each of these situations, determine the useful life over which Goldstein will amortize the intangible assets.
Petes Petroleum, Inc., an SEC registrant with a calendar year-end, is in the business of constructing and operating offs] lore oil platforms. Petes Petroleum is required legally to dismantle and remove the platforms at the end of their useful lives, which is estimated to be 10 years. On January 1, 2019, Pete constructed and began operating an offshore oil platform off the coast of Brazil. The total capitalized cost to construct the platform was 3,700,000. In addition, while the future cost of dismantling the oil platform is difficult to estimate, Pete believes there is a 40% chance that the future cost will be 1,425,000, a 40% chance it will be 1,650,000, and a 20% chance that it will cost 2,125,000. The appropriate discount rate is 12%, and Pete uses the straight-line method of depreciation. Required: 1. Prepare the journal entries that Pete should record in 2019 related to the oil platform. 2. Prepare an amortization schedule for the asset retirement obligation. 3. Next Level Prepare a table showing the effect of accounting for the asset retirement obligation on assets, liabilities, shareholders equity, and net income relative to accounting for the associated costs at the end of the assets service life when the expenditure is made.
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