At the beginning of the current year, Milk Tea Company acquired a trademark for P2,000,000. The trademark has a remaining legal life of 8 years. It is anticipated that the trademark would be routinely renewed in the future. The trademark is expected to generate cash flows of P150,000 per year and the appropriate discount rate is 10%. However, the trademark was tested for impairment and there is a need to be recognized at the end of the year. How much is the impairment loss at the end of the year?

At the beginning of the current year, Milk Tea Company acquired a trademark for P2,000,000. The trademark has a remaining legal life of 8 years. It is anticipated that the trademark would be routinely renewed in the future. The trademark is expected to generate cash flows of P150,000 per year and the appropriate discount rate is 10%. However, the trademark was tested for impairment and there is a need to be recognized at the end of the year. How much is the impairment loss at the end of the year?

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter11: Long-term Assets

Section: Chapter Questions

Problem 6EB: Calico Inc. purchased a patent on a new drug it created. The patent cost $12,000. The patent has a...

See similar textbooks

Similar questions

For each of the following unrelated situations, calculate the annual amortization expense and prepare a journal entry to record the expense: A. A patent with a ten-year remaining legal life was purchased for $300,000. The patent will be usable for another eight years. B. A patent was acquired on a new smartphone. The cost of the patent itself was only $24,000, but the market value of the patent is $600,000. The company expects to be able to use this patent for all twenty years of its life.
Calico Inc. purchased a patent on a new drug it created. The patent cost $12,000. The patent has a life of twenty years, but Calico expects to be able to sell the drug for fifty years. Calculate the amortization expense and record the journal for the first years expense.
On January 1, 2022, Christine Company acquired a trademark for P3,000,000. The trademark has eight years remaining in the legal life. It is anticipated that the trademark will be renewed in the future indefinitely without problem. On December 31, 2022, the trademark is assessed for impairment. Because of a decline in economy, the trademark is expected to generate cash flows of just P120,000 annually. The useful life of the trademark still extends beyond the foreseeable horizon. The appropriate discount rate is 6%. What amount should be recognized as impairment loss on trademark for 2022? A. 1,000,000 B. 2,000,000 C. 3,000,000 D. Zero
On December 31, 2020, Zari Company acquired the following intangible assets:• A trademark for P3,000,000. The trademark has 8 years remaining in its legal life. It is anticipated that the trademark will be renewed in the future, indefinitely, without problem. ,• A patent for P2,000,000. Because of market conditions, it is expected that the patent will have economic life for just 5 years, although the remaining legal life is 10 years.Because of a decline in the economy, the trademark is now expected to generate cash flows of just P120,000 per year. The useful life of the trademark still extends beyond the foreseeable horizon. The cash flows expected to be generated by the patent are P500,000 in 2022, P600,000 in 2023, P400,000 in 2024 and P500,000 in 2025. The appropriate discount rate for all intangible assets is 6%. The present value of 1 at 6% for one period is 0.94, for two periods is 0.89, for three periods is…
At the beginning of the year, a company purchases a patent for $1504000. The remaining legal life of the patent is 10 years, but management estimates that the patent will generate additional revenue for the next 16 years because there are currently no known competitors. What amount of amortization on the patent will be recorded for the asset at the end of the first year, assuming that the straight-line method is used and that the asset was purchased at the beginning of the year? O $-0- $150400 $94000 $188000
On January 2, 2025, Ivanhoe Co. bought a trademark from Rice, Inc. for $1641000. An independent research company estimated that the remaining useful life of the trademark was 10 years. Its unamortized cost on Rice's books was $1969200. Ivanhoe expects that the trademark will produce 25% of its cash flows in year 1, 20% in year 2, 15% in year 3, and 10% in the remaining years. In Ivanhoe's 2025 income statement, what amount should be reported as amortization expense? Select answer from the options below - $410250 $318200 $273500 $164100
During 2017, Summer Company spent P500,000 for the research and development of its patent. On January 1, 2018, the company paid P120,000 to apply for and obtain right to the patent. The useful life of the patent is 10 years.On January 1, 2019, Summer Company purchased a new patent for P1,200,000 which is expected to prolong the life of the original patent by six years. On December 31, 2020, a competitor obtained rights to a patent that rendered Summer Company's patent obsolete.Required: Prepare all entries relative to the patent from 2017 through 2020.
On January 1, 2017, Black Widow acquired the following intangible assets:  A trademark for P2,000,000. The trademark has 8 years remaining in its legal life. It is anticipated that the trademark will be renewed in the future, indefinitely, without a problem.  A patent for P4,000,000. Because of market conditions, it is expected that the patent will have economic life for just 5 years, although the remaining legal life is 10 years. On December 31, 2017, the intangible assets are assessed for impairment. Because of the decline in the economy, the trademark is expected to generate cash flows of just P120,000 per year. The useful life of the trademark still extends beyond the foreseeable horizon. The cash flows expected to be generated by the patent are P500,000 annually for each of the next 4 years. The appropriate discount rate for all intangible assets is 8%. The present value of ordinary annuity of 1 at 8% for four periods is 3.31. What total amount to be recognized as impairment…
A patent was acquired by Renfro Corporation on January 1, 2014, at a cost of $90,000. The useful life of the patent was estimated to be 10 years. At the beginning of 2017, Renfro spent $15,000 in successfully defending an infringement of the patent. At the beginning of 2018, Renfro purchased a patent for $22,000 that was expected to prolong the life of its original patent for 5 additional years. Instructions Calculate the following amounts for Renfro Corporation. (а) Amortization expense for 2014. The balance in the Patent account at the beginning of (b) 2017, immediately after the infringement suit. Amortization expense for 2017. (c) The balance in the Patent account at the beginning of (d) 2018, after purchase of the additional patent. Amortization expense for 2018. (e)
On January 3, 2018, Sweet company bought a patent for P540,000. The estimated useful life of the patent is 8 years. During the year 2021, the company determined that the economic life of the patent is only 6 years from the date of acquisition. 1.)How much is the amortization expense for year 2021? 2.)What is the carrying value of the patent at December 31, 2021?
On January 1, 2020, Purple Inc. purchased a patent for $33, 300. Legal fees paid in this purchase amounted to $1,700. The legal remaining life of the patent is 14 years, but Purple believes it will only help increase sales for the next 10 years. On January 1, 2023, Purple was sued for patent infringement and had to spend $4,900 of legal fees in the successful defense of this patent. What is the book value of this patent on December 31, 2023? Select one: a. $24,500 b. $21,000 c. $ 25,200 d. $30, 240 e. $19,600
In January 2014, the Jennifer Corporation purchased a patent for $231,000 from Travis Company that had a remaining legal life of 14 years. Jennifer estimated that the remaining economic life would be seven years. In January 2018, the company incurred $30,000 in legal costs to defend the patent from an infringement. Jennifer's lawyers were successful, and the remaining years of benefit from the patent were estimated to be six years. What is the patent amortization expense for 2018? $9,923 $21,500 $7,615 $16,500