a. on dec 31 the company determined that 20,000,000 of goodwill was impaired. b.
ID: 2434309 • Letter: A
Question
a. on dec 31 the company determined that 20,000,000 of goodwill was impaired.b. legal costs of 675,000 were incurred on June 30 in obtaining a patient with an estimated economic life of 10yrs. ammortization is to be for one-half yr.
c. timber rights on a tract of land were purchased for 1,665,000 on feb. 16. the stand of timber is est. at 9,000,000 board ft. during the current yr, 2,400,000 board ft of timber were cut and sold.
Instructions
1. determine the amt of the amortization, depletion, or impairmentfor the current yr for each foregoing itmes. (i have answer for b, not a and c)
2. illustrate effects on the accounts and financial statements of the adjustments for each item
***i know its a lot, but any assistance will help big time. thanks.
Explanation / Answer
a) Debit Impairment loss 20,000,000 Credit Goodwill 20,000,000 (This assumes the impairment has caused the fair value of goodwill to fall 20 million below book value) b) Debit Amortization expense 33,750 Credit Patents 33,750 c) Debit Depletion expense 444,000 Credit Timber 444,000 (1,665,000/9,000,000)* 2,400,000 In all of the cases the effect on the financial statements would be to reduce net income and long term assets.
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