Impaired Goodwill and Amortization of Patent
On April 1, a patent with an estimated useful economic life of 12 years was acquired for $100,800. In addition, on December 31, it was estimated that goodwill of $48,000 was impaired.
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a. Record the acquisition of patent. If an amount box does not require an entry, leave it blank.
April 1
Patents
Patents
100,800
Patents
Cash
Cash
Cash
100,800
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Recall that goodwill is not amortized because its useful life is indefinite.
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b. Journalize the adjusting entry on December 31 for the amortization of the patent rights. Do not round intermediate calculations. If an amount box does not require an entry, leave it blank.
Dec. 31
Amortization Expense-Patents
Amortization Expense-Patents
Amortization Expense-Patents
Patents
Patents
Patents
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A separate contra asset account is usually not used for intangible assets. Pay close attention to the date of purchase.
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c. Journalize the adjusting entry on December 31 for the impaired goodwill. If an amount box does not require an entry, leave it blank.
Dec. 31
Loss from Impaired Goodwill
Loss from Impaired Goodwill
48,000
Loss from Impaired Goodwill
Goodwill
Goodwill
Goodwill
48,000
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Goodwill is not amortized like other intangible assets. If Goodwill is impaired, a loss should be recorded.
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