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Journal entries for impairment of intangible assets
Patagonia Corp., a large, privately held company, is preparing its year-end entries. As senior accountant, you have been asked to prepare the entries related to the company's intangible assets.
Patagonia currently carries the following intangible assets* on its balance sheet:
*Current year amortization has already been recorded.
The following additional information is available:
After recent negative press releases relating to the technology that underlies the patent, the company has carried out a recoverability test that indicates that the patent's carrying value is higher than its undiscounted future net cash flows. The patent's fair value has now been estimated at $ 84,000.
The item classified as "Other intangibles" relates to research costs that the company incurred in the current year. According to a statement from the company's President, "The costs were incurred with the intention to gain new knowledge. At the moment we don't know exactly how to use this information, but we are confident that eventually we will be able to use it."
Instructions
Based on the information provided, prepare all journal entries that are required to adjust Patagonia's records as would be required under ASPE.
Deductive Reasoning
Reasoning from a general case that is known to be true to a specific instance.
Abductive
A form of reasoning that begins with observations and seeks to find the simplest and most likely explanation.
Subgoaling
The process of breaking down a larger goal into smaller, more manageable objectives.
Planning
The cognitive process of thinking about and organizing the activities required to achieve a desired goal.
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