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On December 31, it was estimated that goodwill of $6,000,000 was impaired. In addition, a patent with an estimated useful economic life of 12 years was acquired for $1,500,000 on April 1. a. Journalize the adjusting entry on December 31 for the impaired goodwill. b. Journalize the adjusting entry on December 31 for the amortization of the patent rights.

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Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124

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BuyFindarrow_forward

Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124
Chapter 10, Problem 8PEA
Textbook Problem
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On December 31, it was estimated that goodwill of $6,000,000 was impaired. In addition, a patent with an estimated useful economic life of 12 years was acquired for $1,500,000 on April 1.

  1. a. Journalize the adjusting entry on December 31 for the impaired goodwill.
  2. b. Journalize the adjusting entry on December 31 for the amortization of the patent rights.

a.

To determine

Journalize an adjusting entry on December 31 for impaired goodwill.

Explanation of Solution

Intangible Assets: These are the long-term assets having no physical existence. However, the benefits provided by these assets are used by the company for a long period of time. Example: Patent, Trademark, Goodwill, Copyrights.

Amortization: It is the process of allocating the value of the intangible assets over its definite useful life.

Impairment of Goodwill: It is a situation that arises when the carrying value of the goodwill listed on the acquired company’s balance sheet, exceeds its fair market value.

Record an adjusting entry on December 31 for impaired goodwill.

DateAccounts title and explanationPost Ref...

b.

To determine

Journalize an adjusting entry on December 31 for the amortization of the patent rights.

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Chapter 10 Solutions

Financial Accounting
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