Exercise 12-13 (Part Level Submission) (a) Account Titles and Explanation Debit

Question

Exercise 12-13 (Part Level Submission)

(a)

Account Titles and Explanation

Debit

Credit

Exercise 12-13 (Part Level Submission)

Presented below is information related to copyrights owned by Cullumber Company at December 31, 2017.
Cost $8,640,000 Carrying amount 4,370,000 Expected future net cash flows 3,900,000 Fair value 3,210,000
Assume that Cullumber Company will continue to use this copyright in the future. As of December 31, 2017, the copyright is estimated to have a remaining useful life of 10 years.

Explanation / Answer

Impairment Loss = Carring value of an asset - recoverable amount

Recoverable amount = fair value or future economic benefit whichever is higher
= $3,210,000 or $3,900,000
= $3,900,000

Impairment Loss = $4,370,000 - $3,900,000
= $437,000

Accounts Titles and Explanation Debit Credit Loss on Impairment $437,000 Asset $437,000

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