Native Corporation Has Determined That One of Its Finite-Life Intangible

question 121

Essay

Native Corporation has determined that one of its finite-life intangible assets is impaired. The asset's net carrying value on the date of impairment is $1,250,000. In order to estimate impairment, the company uses the discounted cash-flow model. The company projects the asset's future cash flows as follows:
$$\begin{array} { | c | c | } \hline \text { Future period } & \text { Cash-flow projection } \\\hline \text { Year 1 } & \$ 500,000 \\\hline \text { Year 2 } & \$ 350,000 \\\hline \text { Year 3 } & \$ 200,000 \\\hline \text { Year 4 } & \$ 120,000 \\\hline \text { Year 5 } & \$ 60,000 \\\hline\end{array}$$
Assuming a discount rate of 7%, what is the journal entry to record the loss?

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Definitions:

Gain-Loss Theory

A social psychological theory suggesting that an increase or decrease in the perceived value or approval from others influences attraction and emotional reactions.

Compliment Hypothesis

A proposition suggesting that positive feedback or flattery can enhance the effectiveness of a persuasive message.

Self-Esteem

A measure of how much you value and respect yourself.

Perceived Similarity

The extent to which individuals believe they share common attributes, beliefs, or interests with others.