Question

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 1 year ago
Next > < Previous

Related Solutions

On October 31, 2016, Quesnell Corp. (QC), a publicly accountable entity, sold inventory to a customer...
On October 31, 2016, Quesnell Corp. (QC), a publicly accountable entity, sold inventory to a customer in exchange for a $ 450,000, three-year, 3% note receivable. QC’s incremental borrowing rate at the inception of the note receivable was 4%, and the customer’s incremental borrowing rate was 7%. QC’s original cost of the inventory sold was $325,000. QC collected the note in full on October 31, 2019. Interest was received annually on October 31, and the first interest payment was received...
On October 31, 2016, Quesnell Corp. (QC), a publicly accountable entity, sold inventory to a customer...
On October 31, 2016, Quesnell Corp. (QC), a publicly accountable entity, sold inventory to a customer in exchange for a $ 450,000, three-year, 3% note receivable. QC’s incremental borrowing rate at the inception of the note receivable was 4%, and the customer’s incremental borrowing rate was 7%. QC’s original cost of the inventory sold was $325,000. QC collected the note in full on October 31, 2019. Interest was received annually on October 31, and the first interest payment was received...
The Magnus Corporation, a publicly accountable entity, had the following investments as at December 31, 20x2:...
The Magnus Corporation, a publicly accountable entity, had the following investments as at December 31, 20x2: Company Type Classification Original Cost Carrying Value Fair Value Will Corp. Shares FVPL $65,000 $61,000 $58,000 Simon Co. Shares FVPL 205,000 212,000 225,000 Craig Inc. Shares FVOCI 82,000 88,000 106,000 Frey Inc. Shares FVOCI 94,000 80,000 88,000 Blandin Co. Bonds FVOCI 210,106 210,106 210,106 The Blandin Co. bonds were purchased on December 31, 20x2. The bonds have a face value of $200,000, pay interest...
The Timmons Corporation, a publicly accountable entity, exchanged an office building for a strip mall with...
The Timmons Corporation, a publicly accountable entity, exchanged an office building for a strip mall with an unrelated organization. Data on the two properties are as follows: Office Building Strip Mall Original Cost $1,600,000 $1,300,000 Accumulated depreciation 1,100,000 750,000 Fair value 900,000 850,000 Required – a) Prepare the journal entry to record the exchange on the books of Timmons on the assumption that the transaction has commercial substance. b) Prepare the journal entry to record the exchange on the books...
The Cassidy Corporation, a publicly accountable entity, made an accounting policy choice to use the revaluation...
The Cassidy Corporation, a publicly accountable entity, made an accounting policy choice to use the revaluation model for land and buildings. Cassidy has only one parcel of land and one building. Both were purchased on December 31, 20x0. The building has a useful life of 30 years with no residual value. Details on original cost and fair values follows:   Land Building Original Cost (Dec 31, 20x0) $300,000 $15,00,000 Fair Values - Dec 31,20x2 340,000 1,350,000    Dec 31, 20x5 280,000...
On December 31, 20x0, a publicly accountable entity issued convertible bonds for total cash proceeds of...
On December 31, 20x0, a publicly accountable entity issued convertible bonds for total cash proceeds of $21,200,000. The bonds mature on December 31, 20x20 and each bond is convertible at the option of the bondholders at any time. Each $1,000 bond is convertible into 20 common shares. The face value of the bonds is $20,000,000 and pay an annual coupon of 3%. Coupon payment dates are June 30 and December 31. Bonds of similar risk would have yielded 2.8%. Required...
Everything Equine Corp. (EEC) is a publicly accountable enterprise that specializes in providing horse-related goods and...
Everything Equine Corp. (EEC) is a publicly accountable enterprise that specializes in providing horse-related goods and services to horse owners. EEC commenced operations on January 1, 20X2. Select details of transactions with respect to EEC’s property, plant and equipment (PPE) and intangible assets are as follows: April 1, 20X2 - EEC purchased the PPE of a company in financial distress for $1,800,000 and immediately brought it into use. At the time of purchase, an independent appraiser provided the following valuation...
Clara Corp. is a publicly traded entity. On January 1, 20X3, it is trying to decide...
Clara Corp. is a publicly traded entity. On January 1, 20X3, it is trying to decide whether to grant equity-settled stock options or cash-settled share appreciation rights (SARs) to its employees. Its bank loan has a debt-to-asset covenant that must be maintained and the board of directors is concerned about the impact these compensation plans will have on this covenant. The directors are considering two alternatives as described below: 1. Grant 20,000 equity-settled stock options to its management team. Relevant...
Question 2 (15 marks) Part A Luxury Living Concepts Corp. (LLC) is a publicly accountable enterprise...
Question 2 Part A Luxury Living Concepts Corp. (LLC) is a publicly accountable enterprise that builds large complexes, including schools, office towers, apartment buildings and shopping centres, on a contract basis. Additional information with respect to the company is as follows: - LLC’s year end is December 31. - The company uses the cost-to-cost approach to determine the stage of completion of its construction projects. - The enterprise rounds the percentage of completion to two decimal places (for example, 13.54%)....
Question 2 (15 marks) Part A Luxury Living Concepts Corp. (LLC) is a publicly accountable enterprise...
Question 2 Part A Luxury Living Concepts Corp. (LLC) is a publicly accountable enterprise that builds large complexes, including schools, office towers, apartment buildings and shopping centres, on a contract basis. Additional information with respect to the company is as follows: - LLC’s year end is December 31. - The company uses the cost-to-cost approach to determine the stage of completion of its construction projects. - The enterprise rounds the percentage of completion to two decimal places (for example, 13.54%)....
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT