Question

Presented below is information related to copyrights owned by Cullumber Company at December 31, 2020. Cost $8,590,000 Carrying amount 4,430,000 Expected future net cash flows 4,190,000 Fair value 3,330,000 Assume that Cullumber Company will continue to use this copyright in the future. As of December 31, 2020, the copyright is

Answer 1

A. Dr Loss on Impairment $1,100,000

Cr Copyrights $1,100,000

B. Dr Amortization Expense $333,000

Cr Copyrights $333,000

C. No Entry

Step-by-step explanation:

A. Preparation of the journal entry to record the impairment of the asset at December 31, 2020

Dr Loss on Impairment 1,100,000

Cr Copyrights 1,100,000

(4,430,000-3,330,000)

(To record impairment of the asset )

Carrying amount 4,430,000

Fair value 3,330,000

Loss on impairment $1,100,000

B. Preparation of the journal entry to record amortization expense for 2021 related to the copyrights.

Dr Amortization Expense $333,000

Cr Copyrights $333,000

(3,330,000÷10 years)

(To record amortization expense)

New carrying amount 3,330,000

Useful life ÷ 10 years

Amortization per year $333,000

C.Preparation of the journal entry necessary to record the increase in fair value

No Entry