Question

In early January 2016, Bramble Corporation applied for a trade name, incurring legal costs of $16,080. In January 2017, Bramble incurred $7,880 of legal fees in a successful defense of its trade name.Compute 2016 amortization, 12/31/16 book value, 2017 amortization, and 12/31/17 book value if the company amortizes the trade name over 10 years

2016 amortization

12/31/16 book value

2017 amortization

12/31/17 book value

Compute the 2017 amortization and the 12/31/17 book value, assuming that at the beginning of 2017, Bramble determines that the trade name will provide no future benefits beyond December 31, 2020.

2017 amortization

12/31/17 book value

Ignoring the response for part (b), compute the 2018 amortization and the 12/31/18 book value, assuming that at the beginning of 2018, based on new market research, Bramble determines that the fair value of the trade name is $14,560. Estimated total future cash flows from the trade name is $15,760 on January 3, 2018.

2018 amortization

12/31/18 book value

Answer 1

1. 2016 Amortization = $16080/10years

= $1608

12/31/2016 Book Value = $16080-$1608 = $14472

2017 Amortization = ($14472 +$7880)/9 = $2483.56

13/31/2017 Book Value = ($14472+$7880-2483.56) = $19868.44

B) Assuming trade names will provide no future benefits beyond December 2020

2017 Amortization = ($14472 +$7880)/4 = $5588

12/31/2017 Book Value = ($14472 +$7880- $5588)= $16764

C)

Carrying Amount 19868.44 is greater than future cash flows $15760, thus the Trade name fails the recovery test. The new carrying value is $14560, the trade name's fair value

2018 Amortization (After recording impairment loss)

$14560/8 = $1820

12/31/2018 Book Value = ($14560-$1820) = $12740