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Exam 12: Intangible Assets and Goodwill

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Question 21

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On January 1, 2020, Muhlenberg Corp. bought a trademark from Glasgow Corp. for $ 160,000. An independent consultant retained by Muhlenberg estimated that the remaining useful life is 50 years. The trademark's carrying value on Glasgow's books was $ 61,000. Muhlenberg decided to write off the trademark over the maximum period allowed. How much should be amortized for the year ended December 31, 2020?

A) $ 1,220
B) $ 3,200
C) $ 4,000
D) $ 8,000

E) A) and B)
F) All of the above

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Question 22

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If the fair value of the net assets acquired in a business combination is greater than the purchase price, the difference is called

A) organizational costs.
B) contributed surplus.
C) purchased goodwill.
D) negative goodwill or bargain purchase.

E) None of the above
F) C) and D)

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Question 23

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Which of the following is NOT a factor to be considered in determining a limited-life intangible asset's useful life?

Disclosures required for internally generated intangible assets Briefly outline what information is required to be disclosed for each class of intangible asset. What is the goal of these disclosures for publicly accountable entities?

Reporting a patent purchase Comox Corporation has a December 31 fiscal year end. Comox purchased a patent from Courtney Inc. for $ 400,000 on January 1, 2017. The patent expires on January 1, 2025. Comox has been amortizing it over its legal life. During 2020, Comox determined that the patent's economic benefits would not last longer than six years from the date of acquisition. Instructions Determine the amount that will be reported on a) Comox's December 31, 2019 and 2020, statements of financial position. b) Comox's 2020 income statement. Be specific about the account name and the account.

12-107 Determining goodwill impairment - ASPE and IFRS Gandaph Corporation purchased a division five years ago for $ 3 million. The division has been identified as a reporting unit that is cash-generating under IFRS. Management is reviewing the division for impairment of goodwill and has estimated the fair value of the reporting unit to be $ 3.8 million and the unit's value in use to be $ 3.9 million. In addition, there would be $ 75,000 in direct costs should the company decide to sell. The carrying amounts of the division's net assets, including the associated goodwill of $ 1,350,000, are listed below. $\bold{\text{Carrying Amount of Net Assets Including Goodwill}}$ $\begin{array} { l r } \text { Cash } & \$ 300,000 \\\text { Receivables } & 450,000 \\\text { Inventory } & 1,050,000 \\\text { Property, plant, and equipment (net) } & 1,200,000 \\\text { Goodwill } & 1,350,000 \\\text { Less: Accounts and notes payable } &\underline{ ( 750,000 ) }\\\text { Net assets, at carrying amounts } & \underline{\$ 3,600,000}\end{array}$ Instructions Would goodwill be considered impaired under ASPE? Would your answer change under IFRS?

Journal entries for patent sale Amplify Inc. purchased a patent on September 1, 2020 for $ 41,080. At the time of purchase, Amplify estimated that the patent's economic benefits would last until the end of 2024. Amplify's fiscal year end is December 31. On April 1, 2023, Amplify sold the patent to another company. Instructions a) Prepare the journal entry to record the sale, assuming Amplify sold the patent for $ 21,690. b) Prepare the journal entry to record the sale, assuming Amplify sold the patent for $ 12,240.

Dover Inc. incurred the following costs during the year ended December 31, 2020: Laboratory research aimed at discovery of new knowledge............ $\$ 80,000$ Dexign of new products involving new technology.......................... $2 9,000$ Teting of new products.....................................................................19,000 Construction of research and development facilitie........................120,000 Assuming the Gspecific conditions have been demonstrated, the total amount to be classifiedas development costs (either deferred or capitalized) in $2020$ is

Internally generated goodwill

At December 31, 2020, Walker Corp.'s general ledger includes the following account balances: Copyrights................................................................................................$50,000 Depasit with advertising agency (will be used to promote goodwill) ..32,000 Discount on bonds payable..........................................................................72,700 Excens of cost over fair value of identifiable net assets of acquiredsubsidiary........................................................................................578,000 Trademarks.................................................................................................102,000 In the preparation of Walker's balance sheet as of December 31, 2020, what should be reported as total intangible assets?

Technology-based intangible assets Provide an example of a technology-based intangible asset. Over what period should these types of assets be amortized?

Intangible assets The following transactions involving intangible assets of Falkland Corporation occurred on or near December 31, 2020. Complete the chart below by preparing the journal entry(ies) needed at that date to record the transaction, and at December 31, 2021 to record any resultant amortization. If no entry is required at a particular date, write "None needed."

If a trademark is developed by the enterprise itself, the costs should be

A patent is an example of a(n)

Which of the following is INCORRECT about the measurement of purchased intangible assets?

A copyright is an example of a(n)

The owners of Dallas Electronics Store are contemplating selling the business. The cumulative earnings for the past 5 years totalled $ 900,000, including a gain on discontinued operations of $ 30,000. The annual earnings based on an average rate of return on investment for this industry would have been $ 138,000. If excess earnings are to be capitalized at 15%, then implied goodwill should be

Intangible asset impairment Roi Inc. is a private corporation following ASPE. On Jan 2, 2020 they purchased a limited-life licence for $ 50,000. This licence has a ten-year life and is not renewable. Straight-line amortization will be used. At December 31, 2021, Roi estimates that the undiscounted net cash flows of this license is $ 38,000, and the fair value (discounted net future cash flows) of this licence is $ 32,000. Instructions a) Calculate the amount of impairment (if any) for this asset. b) Prepare the adjusting entry required to reflect any impairment.

Under IFRS, which of the following statements best describes when goodwill should be tested for impairment?

Determining impairment loss under ASPE On September 1, 2020, Humble Corporation acquired Roots Media for a cash payment of $ 859,100. At the time of purchase, Roots' statement of financial position showed assets of $ 899,600, liabilities of $ 462,300, and owner's equity of $ 437,300. The fair value of Roots' assets is estimated to be $ 1,163,900. Instructions a) Assuming that Humble Corporation is a private entity, explain how goodwill will be tested for impairment. b) If the unit's carrying amount (including goodwill) is $ 3,617,400 and its fair value is $ 3,553,200, what is the impairment loss, if any, under ASPE?