| The following information is for a copyright owned by Flounder Corp., a private entity, at December 31, 2020. Flounder Corp. applies ASPE.Cost$4,305,000Carrying amount2,149,000Expected future net cash flows (undiscounted)2,014,000Fair value1,671,000Assume that Flounder Corp. will continue to use this copyright in the future. As at December 31, 2020, the copyright is estimated to have a remaining useful life of 8 years. |
| Prepare the journal entry, if any, to record the asset’s impairment at December 31, 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)DateAccount Titles and ExplanationDebitCreditDec. 31, 2020enter an account title for the journal entry on December 31enter a debit amountenter a credit amountenter an account title for the journal entry on December 31enter a debit amountenter a credit amountShow List of AccountsLink to TextLink to TextLink to Video |
| Prepare the journal entry to record amortization expense for 2021 related to the copyright. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)Account Titles and ExplanationDebitCreditenter an account titleenter a debit amountenter a credit amountenter an account titleenter a debit amountenter a credit amountShow List of AccountsLink to TextLink to TextLink to Video |
| The copyright’s fair value at December 31, 2021, is $2.4 million. Prepare the journal entry, if any, to record the increase in fair value. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)DateAccount Titles and ExplanationDebitCreditDec. 31, 2021enter an account title for the journal entry on December 31enter a debit amountenter a credit amountenter an account title for the journal entry on December 31enter a debit amountenter a credit amount |
(a) December 31, 2020
Loss on Impairment....................................................................................... 478,000*
Accumulared Impairment Losses -Copyrights................................ 478,000 ........
Since the carrying amount of the copyright exceeds the undiscounted future cash flows there is impairment. The impairment loss is calculated as follows:
*Carrying amount $2,149,000
Fair value. ( 1,671,000 )
Loss on impairment $478,000
(b) Amortization Expense ................................................................ 208,875* ...................
Accumulated Amortization - Copyrights ................................ 208,875 ..........
*New carrying amount $1,671,000
Useful life ( divided by). 8 years
Amortization per year $ 208,875
(c) No entry is necessary. Reversal of impairment losses is not permitted under ASPE.
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