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On December 31, it was estimated that goodwill of $3,867,800 was impaired. In addition, a patent with an estimated useful economic life of 13 years was acquired for $468,000 on April 1. A. Journalize the adjusting entry on December 31 for the impaired goodwill. Refer to the Chart of Accounts for exact wording of account titles. B. Journalize the adjusting entry on December 31 for the amortization of the patent rights. Refer to the Chart of Accounts for exact wording of account titles.

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Answer:

A. Dr Loss from Impaired Goodwill $3,867,800

Cr Goodwill $3,867,800

B. Dr Amortization Expense—Patents $27, 000

Cr Patents $27,000

Explanation:

a. Preparation of the adjusting entry on December 31 for the impaired goodwill

Dec. 31

Dr Loss from Impaired Goodwill $3,867,800

Cr Goodwill $3,867,800

(To reocord Impaired goodwill)

b.Preparation of the adjusting entry on December 31 for the amortization of the patent rights.

Dec. 31

Dr Amortization Expense—Patents $27, 000

Cr Patents $27,000

[($468,000 ÷ 13) × 9/12]

(To record Amortized patent rights)

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