Starn Tool & Manufacturing Company, located in Meadville, PA, provides component machining for robotics, drones, vision systems. and special machines and assemblies for the aerospace, military, commercial, automotive, and medical Industries. Assume the company has five different intangible assets to be accounted for and reported on the financial statements. The management is concerned about the amortization of the cost of each of these intangibles. Facts about each Intangible follow a Patent. The company purchased a patent for a new tool at a cash cost of $71,500 on January 1, 2023. The patent has an estimated useful life of 13 years. b. Copyright. On January 1, 2023, the company purchased a copyright for $28.500 cash. It is estimated that the copyrighted item will have no value by the end of 10 years c. Franchise. The company obtained a franchise from H & H Tool Company to make and distribute a special item for the automotive industry. It obtained the franchise on January 1, 2023, at a cash cost of $15,600 for a 10-year period. d. License. On January 1, 2022, the company secured a license from the city to operate a special service for a period of five years. Total cash expended to obtain the license was $15,200. e. Goodwill. The company purchased another business in January 2020 for a cash lump sum of $520,000. Included in the purchase price was "Goodwill, $52,000. Company executives stated that "the goodwill is an important long-lived asset to us." It has an indefinite life. Required: 1. Compute the amount of amortization that should be recorded for each Intangible asset at the end of the annual accounting period, December 31, 2023
Starn Tool & Manufacturing Company, located in Meadville, PA, provides component machining for robotics, drones, vision systems. and special machines and assemblies for the aerospace, military, commercial, automotive, and medical Industries. Assume the company has five different intangible assets to be accounted for and reported on the financial statements. The management is concerned about the amortization of the cost of each of these intangibles. Facts about each Intangible follow a Patent. The company purchased a patent for a new tool at a cash cost of $71,500 on January 1, 2023. The patent has an estimated useful life of 13 years. b. Copyright. On January 1, 2023, the company purchased a copyright for $28.500 cash. It is estimated that the copyrighted item will have no value by the end of 10 years c. Franchise. The company obtained a franchise from H & H Tool Company to make and distribute a special item for the automotive industry. It obtained the franchise on January 1, 2023, at a cash cost of $15,600 for a 10-year period. d. License. On January 1, 2022, the company secured a license from the city to operate a special service for a period of five years. Total cash expended to obtain the license was $15,200. e. Goodwill. The company purchased another business in January 2020 for a cash lump sum of $520,000. Included in the purchase price was "Goodwill, $52,000. Company executives stated that "the goodwill is an important long-lived asset to us." It has an indefinite life. Required: 1. Compute the amount of amortization that should be recorded for each Intangible asset at the end of the annual accounting period, December 31, 2023
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
Chapter10: Property, Plant And Equipment: Acquisition And Subsequent Investments
Section: Chapter Questions
Problem 19E
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Starn Tool & Manufacturing Company, located in Meadville, PA, provides component machining for robotics, drones, vision systems,
and special machines and assemblies for the aerospace, military, commercial, automotive, and medical Industries. Assume the
company has five different intangible assets to be accounted for and reported on the financial statements. The management is
concerned about the amortization of the cost of each of these intangibles. Facts about each Intangible follow.
a. Patent. The company purchased a patent for a new tool at a cash cost of $71,500 on January 1, 2023. The patent has an estimated
useful life of 13 years.
b. Copyright. On January 1, 2023, the company purchased a copyright for $28,500 cash. It is estimated that the copyrighted Item will
have no value by the end of 10 years.
c. Franchise. The company obtained a franchise from H & H Tool Company to make and distribute a special item for the automotive
Industry. It obtained the franchise on January 1, 2023, at a cash cost of $15,600 for a 10-year period.
d. License. On January 1, 2022, the company secured a license from the city to operate a special service for a period of five years.
Total cash expended to obtain the license was $15,200.
Item
e. Goodwill. The company purchased another business in January 2020 for a cash lump sum of $520,000. Included in the purchase
price was "Goodwill, $52,000. Company executives stated that "the goodwill is an important long-lived asset to us." It has an
indefinite life.
a. Patent
b. Copyright
c. Franchise
d. License
e. Goodwill
Required:
1. Compute the amount of amortization that should be recorded for each Intangible asset at the end of the annual accounting period.
December 31, 2023.
2. Determine the book value of each Intangible asset on December 31, 2024.
3. Assume that on January 2, 2025, the copyrighted Item was likely Impaired in its ability to continue to produce strong revenues due
to a legal dispute. The other Intangible assets were not affected. Starn estimated that the copyright would be able to produce future
cash flows of $20,600. The fair value of the copyright was determined to be $19,600. Compute the amount, if any, of the impairment
loss to be recorded.
Required 1
Complete this question by entering your answers in the tabs below.
Required 1
a. Patent
b. Copyright
c. Franchise
d. License
e. Goodwill
Compute the amount of amortization that should be recorded for each intangible asset at the end of the annual accounting
period, December 31, 2023.
Required 2 Required 3
Complete this question by entering your answers in the tabs below.
Required 2
Required 3
Determine the book value of each intangible asset on December 31, 2024.
Impairment loss
Amortization
Total book value $
Book Value
December 31, 2024
< Required 1
Required 2 >
Required 2 Required 3
< Required 1
Complete this question by entering your answers in the tabs below.
Required 3 >
Required 1
Assume that on January 2, 2025, the copyrighted item was likely impaired in its ability to continue to produce strong
revenues due to a legal dispute. The other intangible assets were not affected. Starn estimated that the copyright would be
able to produce future cash flows of $20,600. The fair value of the copyright was determined to be $19,600. Compute the
amount, if any, of the impairment loss to be recorded.
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