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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.
Financial Accounting
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Financial Accounting
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.
a.
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.
| Date | Accounts title and explanation | Post Ref... |
b.
Journalize an adjusting entry on December 31 for the amortization of the patent rights.
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