On January 1, 2023 (the first day of its fiscal year) Blossom Ltd. acquired a patent which gave the company the right to use a production process. The process met the six criteria for capitalization as an intangible asset. Below is a listing of the events relating to the patent over the five fiscal years from 2023 through 2027: 2023: on January 1, acquired the patent for the production process for a cash payment of $17,500,000, and determined that the process had an indefinite useful life. on December 31, tested the patent for impairment and determined that its fair value was $18,200,000. 2024: on December 31, tested the patent for impairment and determined that its fair value was $16,400,000. 2025: on December 31, tested the patent for impairment and determined that its fair value was $17,300,000. 2026: on January 1, determined that the useful life of the patent was no longer indefinite, its carrying amount was recoverable, its estimated remaining useful life was 8 years, its estimated residual value was $0 and the pattern of economic benefits to be obtained from the patent during those 8 years was evenly spread over those 8 years. on December 31, tested the process for impairment and recoverability and determined that its fair value was $700,000 and its carrying amount was recoverable. 2027: on December 31, tested the patent for impairment and recoverability and determined that its fair value was $0 and its carrying amount was not recoverable.

SWFT Essntl Tax Individ/Bus Entities 2020
23rd Edition
ISBN:9780357391266
Author:Nellen
Publisher:Nellen
Chapter8: Property Transactions: Capital Gains And Losses, Section 1231 And Recapture Provisions
Section: Chapter Questions
Problem 38P
icon
Related questions
Question
On January 1, 2023 (the first day of its fiscal year) Blossom Ltd. acquired a patent which gave the company the right to use a
production process. The process met the six criteria for capitalization as an intangible asset. Below is a listing of the events relating to
the patent over the five fiscal years from 2023 through 2027:
2023:
on January 1, acquired the patent for the production process for a cash payment of $17,500,000, and determined that the
process had an indefinite useful life.
on December 31, tested the patent for impairment and determined that its fair value was $18,200,000.
2024:
on December 31, tested the patent for impairment and determined that its fair value was $16,400,000.
2025:
on December 31, tested the patent for impairment and determined that its fair value was $17,300,000.
2026:
on January 1, determined that the useful life of the patent was no longer indefinite, its carrying amount was recoverable, its
estimated remaining useful life was 8 years, its estimated residual value was $0 and the pattern of economic benefits to be
obtained from the patent during those 8 years was evenly spread over those 8 years.
on December 31, tested the process for impairment and recoverability and determined that its fair value was $700,000 and its
carrying amount was recoverable.
2027:
on December 31, tested the patent for impairment and recoverability and determined that its fair value was $0 and its
carrying amount was not recoverable.
Transcribed Image Text:On January 1, 2023 (the first day of its fiscal year) Blossom Ltd. acquired a patent which gave the company the right to use a production process. The process met the six criteria for capitalization as an intangible asset. Below is a listing of the events relating to the patent over the five fiscal years from 2023 through 2027: 2023: on January 1, acquired the patent for the production process for a cash payment of $17,500,000, and determined that the process had an indefinite useful life. on December 31, tested the patent for impairment and determined that its fair value was $18,200,000. 2024: on December 31, tested the patent for impairment and determined that its fair value was $16,400,000. 2025: on December 31, tested the patent for impairment and determined that its fair value was $17,300,000. 2026: on January 1, determined that the useful life of the patent was no longer indefinite, its carrying amount was recoverable, its estimated remaining useful life was 8 years, its estimated residual value was $0 and the pattern of economic benefits to be obtained from the patent during those 8 years was evenly spread over those 8 years. on December 31, tested the process for impairment and recoverability and determined that its fair value was $700,000 and its carrying amount was recoverable. 2027: on December 31, tested the patent for impairment and recoverability and determined that its fair value was $0 and its carrying amount was not recoverable.
Prepare all journal entries related to the patent for the production process Blossom will record from January 1, 2023 to December 31,
2027, using the cost recovery impairment model. (If no entry is required, select "No Entry" for the account titles and enter O for the amounts.
Credit account titles are automatically indented when amount is entered. Do not indent manually. List all debit entries before credit entries.)
Date
Account Titles and Explanation
(To record amortization expense)
(To record loss on impairment)
Debit
Credit
Transcribed Image Text:Prepare all journal entries related to the patent for the production process Blossom will record from January 1, 2023 to December 31, 2027, using the cost recovery impairment model. (If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. List all debit entries before credit entries.) Date Account Titles and Explanation (To record amortization expense) (To record loss on impairment) Debit Credit
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps

Blurred answer
Knowledge Booster
Accounting for Intangible assets
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
SWFT Essntl Tax Individ/Bus Entities 2020
SWFT Essntl Tax Individ/Bus Entities 2020
Accounting
ISBN:
9780357391266
Author:
Nellen
Publisher:
Cengage
SWFT Comprehensive Vol 2020
SWFT Comprehensive Vol 2020
Accounting
ISBN:
9780357391723
Author:
Maloney
Publisher:
Cengage
SWFT Individual Income Taxes
SWFT Individual Income Taxes
Accounting
ISBN:
9780357391365
Author:
YOUNG
Publisher:
Cengage
Intermediate Accounting: Reporting And Analysis
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
CONCEPTS IN FED.TAX., 2020-W/ACCESS
CONCEPTS IN FED.TAX., 2020-W/ACCESS
Accounting
ISBN:
9780357110362
Author:
Murphy
Publisher:
CENGAGE L
Principles of Accounting Volume 1
Principles of Accounting Volume 1
Accounting
ISBN:
9781947172685
Author:
OpenStax
Publisher:
OpenStax College