Presented below is information related to copyrights owned by Ivanhoe Company at December 31, 2020.
Cost $8,620,000
Carrying amount 4,300,000
Expected future net cash flows 4,180,000
Fair value 3,440,000
Assume that Ivanhoe Company will continue to use this copyright in the future. As of December 31, 2020, the copyright is estimated to have a remaining useful life of 10 years.
Required:
(a) Prepare the journal entry to record the impairment of the asset at December 31, 2020. The company does not use accumulated amortization accounts.(b) Prepare the journal entry to record amortization expense for 2021 related to the copyrights

A.

Impairment of Intangible Assets

Dr Loss on impairment 860,000

Cr Copyrights 860,000

B.

Dr Amortization expense 344,000

Cr Copyrights 344,000

Explanation:

Ivanhoe Company

Impairment of Intangible Assets

Recoverability test: If the sum of the expected future net cash flows is less or lower than the carrying amount of the asset, then an impairment has occurred.

Asset is Impaired

Expected future cash flow$4,180,000

Carrying value $4,300,000

$(120,000)

A.

Impairment of Intangible Assets

Dr Loss on impairment 860,000

Cr Copyrights 860,000

Fair value test:Carrying amount $ 4,300,000

Fair value 3,440,000

Loss on impairment$ (860,000)

B.

Dr Amortization expense 344,000

Cr Copyrights 344,000

Carrying amount$3,440,000

Useful life ÷10 years

Amortization per year$ 344,000

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so for 24 people, you'll need 15 lbs of apples, and 6 cups of flour.