Data related to the acquisition of timber rights and intangible assets during the current year ended December 31 are as follows:

Timber rights on a tract of land were purchased for $1,600,000 on February 22. The stand of timber is estimated at 5,000,000 board feet. During the current year, 1,100,000 board feet of timber were cut and sold.
On December 31, the company determined that $3,750,000 of goodwill was impaired.
Governmental and legal costs of $6,600,000 were incurred on April 3 in obtaining a patent with an estimated economic life of 12 years. Amortization is to be for three-fourths of a year.
Required:

1. Determine the amount of the amortization, depletion, or impairment for the current year for each of the foregoing items. Do not round your intermediate calculations.

Item Impairment, Amortization or Depletion Expense
a. $
b. $
c. $

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2. Journalize the adjusting entries required to record the amortization, depletion, or impairment for each item.

Question

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Respuesta :

AbsorbingMan AbsorbingMan · Answer 1 · 2021-02-15T08:59:51+01:00

Solution:

Given :

Timber rights were purchased for = $1,600,000

The stand of the timber is = 5,000,000 board feet

Goodwill impaired by the company = $3,750,000

Timber cut and sold during current year = 1,100,000 board feet

Government legal cost = $6,600,000

Therefore the amount of amortization , depletion and the impairment of the current year for each foregoing item are :

1.

Item Impairment, Amortization or the depletion

a). $ 352,000

b). $ 3,750,000

c). $ 412,500

2. Jornalizing the entries that required to record the depletion, amortization or the impairment of each of the items are :

a). The depletion expense = $ 352,000

Accumulated expense = $ 352,000

b). Loss from the impaired goodwill = $3,750,000

The goodwill = $3,750,000

c). Amortization expenses patent= $412500

Patent = $412500