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

question 17

Multiple Choice

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%, which of the following is included in the journal entry to record the loss? (Use spreadsheet software or a financial calculator to calculate your answer.)

• A) credit Impairment Loss on Intangible Asset $30,000
• B) debit Accumulated Depreciation $179,421
• C) debit Intangible Asset $30,000
• D) credit Intangible Asset $179,421

---

Definitions:

Timmons Model

A model of entrepreneurship that emphasizes the dynamic balance between opportunity, resources, and team, with an entrepreneur at the center managing these elements.

Sustainability

The practice of maintaining processes or systems, notably in environmental, economic, and social contexts, in a way that prevents the depletion of natural resources, ensuring long-term ecological balance.

Lifestyle Ventures

Businesses started primarily to fulfill the personal goals and interests of the founder rather than to achieve high financial growth.

Advantages

Benefits or favorable aspects associated with a particular choice, action, or decision.