Jung Inc Owns a Patent for Which It Paid $66 Million

question 46

Multiple Choice

Jung Inc. owns a patent for which it paid $66 million. At the end of 2009, it had accumulated amortization on the patent of $16 million. Due to adverse economic conditions, Jung's management determined that it should assess whether an impairment should be recognized for the patent. The estimated undiscounted future cash flows to be provided by the patent total $43 million, and the patent's fair value at that point is $35 million. Under these circumstances, Lester:

• A)Would record no impairment loss on the patent.
• B)Would record a $7 million impairment loss on the patent.
• C)Would record a $15 million impairment loss on the patent.
• D)Would record a $31 million impairment loss on the patent.The patent fails the recoverability test, and the impairment is measured by the difference between its fair value of $35 million and its book value of $50 million ($66 million 16 million).

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Definitions:

Femur

The longest and strongest bone in the human body, located in the thigh, connecting the hip to the knee.

Home Health Agency

An organization that provides healthcare services to individuals in their residence.

Survey

A method of gathering information from individuals, often by using questionnaires or interviews, for research or assessment.

Quality of Care

A measure of the degree to which health services for individuals and populations increase the likelihood of desired health outcomes in line with current professional knowledge.