Question

Use the information in IFRS12-6. Assume that at the end of the year following the impairment (after recording amortization expense), the estimated recoverable amount for the patent is \(130,000. Prepare Kenoly’s journal entry, if needed.

Kenoly Corporation owns a patent that has a carrying amount of \)300,000. Kenoly expects future net cash flows from this patent to total \(210,000 over its remaining life of 10 years. The recoverable amount of the patent is \)110,000. Prepare Kenoly’s journal entry, if necessary, to record the loss on impairment.

Short answer

Recovery of Loss from Impairment = $31,000

Step-by-step solution

Meaning of Patents 

Patents are a company's most valuable intangible assets, granting specific legal rights to use a process or develop and sell a product. The value of patents rises or falls in accordance with the performance of the business

Preparing journal entries 

Date	Particulars	Debit ($)	Credit ($)
	Patents $\left[\$130,000-\left(\$110,000-\$11,000\right)\right]$	31,000
	Recovery of Loss from Impairment		31,000