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In: Accounting

The following information is for a copyright owned by Bridgeport Corp., a publicly accountable entity, at...

The following information is for a copyright owned by Bridgeport Corp., a publicly accountable entity, at December 31, 2020. Bridgeport Corp. applies IFRS. Cost $4,304,000 Carrying amount 2,174,000 Expected future net cash flows (undiscounted) 2,043,000 Fair value 1,517,000 Assume that Bridgeport Corp. will continue to use this copyright in the future. As at December 31, 2020, the copyright is estimated to have a remaining useful life of 10 years. The copyright’s value in use is $1,882,000 and its selling costs are $118,000. Prepare the journal entry, if any, to record the asset’s impairment at December 31, 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Date Account Titles and Explanation Debit Credit Dec. 31, 2020 Prepare the journal entry to record amortization expense for 2021 related to the copyright. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit The copyright’s fair value at December 31, 2021, is $2.5 million. Prepare the journal entry, if any, to record the increase in fair value. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Date Account Titles and Explanation Debit Credit Dec. 31, 2021

Solutions

Expert Solution

An asset is said to be impaired if the book value of the asset is higher than undiscounted cash flows expected from the asset

2020

Book Value = 2,174,000

Undiscounted cash flows expected = 2,043,000

Book value is more than Undiscounted cash flows in 2020. Thus impairment.

Impairment = Book value - Recoverable amount

Recverable amount is higher of:

A. Fair value - Selling costs = $1,517,000 - $118,000 = $1.399,000

B. Value in use = $1,882,000 (is higher)

Impairment loss = $2,174,000 - $1,882,000 = $292,000

Journal entry

Impairment loss $292,000

To Accumulated Impairment loss $292,000

New book value = $2,174,000 - $292,000 = $1,882,000

2021

Book value at 2021 is lower than its recoverable amount. But fairvalue has increased. Only amount of impairment earlier expensed can be reversed.

Fair value - Book value =  $2,500,000 - $1,882,000 = $618,000

Journal

Accumulated Impairment loss $292,000

Copyright $326,000

To Gain in value of Copyright $326,000

Revaluation Surplus $292,000

ekkarill92 answered 2 years ago
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