Question

Assume that on january 2, 2025, the copyrighted item was likely impaired in its ability to continue to produce strong revenues due to a legal dispute. the other intangible assets were not affected. starn estimated that the copyright would be able to produce future cash flows of $17,000. the fair value of the copyright was determined to be $16,000. compute the amount, if any, of the impairment loss to be recorded.

Answer 1

To record an impairment loss, the carrying amount of the copyrighted item must be compared to the recoverable amount; the impairment loss is the carrying amount minus the higher of the fair value or the future cash flows.

Step-by-step explanation:

To calculate the impairment loss for the copyrighted item, we compare the carrying amount with the recoverable amount, which is the higher of the fair value minus costs to sell and the value in use. In this case, the carrying amount is not provided, but the future cash flows which could represent value in use are $17,000, and the fair value is $16,000. If we assume that the carrying amount exceeds both these values, the impairment loss would be the difference between the carrying amount and the higher of the fair value or the future cash flows.

As the future cash flows ($17,000) are higher than the fair value ($16,000), we would use $17,000 as the recoverable amount. The impairment loss is thus the carrying amount minus $17,000. Without the carrying amount, we cannot calculate the exact impairment loss, but this explanation provides the method to do so once the carrying amount is known.