Chapter 12: Q33. (page 610)
What is the purpose of a cash flow hedge?
The primary purpose of a cash flow hedge is to hedge exposure to the cash flow risk.
Over 30 million students worldwide already upgrade their learning with Vaia!
All the tools & learning materials you need for study success - in one app.
Get started for free
What should be the pattern of amortization for a limited-life intangible?
Use the information provided in IFRS12-8. Assume that the recoverable amount of the division is estimated to be \(750,000. Prepare Waters’ journal entry, if necessary, to record an impairment of the goodwill.
Waters Corporation purchased Johnson Company 3 years ago and at that time recorded goodwill of \)400,000. The Johnson Division’s net assets, including the goodwill, have a carrying amount of \(800,000. The recoverable amount of the division is estimated to be \)1,000,000. Prepare Waters’ journal entry, if necessary, to record impairment of the goodwill.
On January 2, 2017, Raconteur Corp. reported the following intangible assets: (1) copyright with a carrying value of \(15,000, and (2) a trade name with a carrying value of \)8,500. The trade name has a remaining life of 5 years and can be renewed at nominal cost indefinitely. The copyright has a remaining life of 10 years.
At December 31, 2017, Raconteur assessed the intangible assets for possible impairment and developed the following information.
Estimated Undiscounted Expected Future Cash Flows | Estimated Fair Value | |
Copyright | \(20,000 | \)16,000 |
Trade name | 10,000 | 5,000 |
Accounting
Prepare any journal entries required for Raconteur’s intangible assets at December 31, 2017.
Analysis
Many stock analysts indicate a preference for less-volatile operating income measures. Such measures make it easier to predict future income and cash flows, using reported income measures. How does the accounting for impairments of intangible assets affect the volatility of operating income?
Principles
Many accounting issues involve a trade-off between the primary characteristics of relevant and representationally faithful information. How does the accounting for intangible asset impairments reflect this trade-off?
Romo Company spent \(190,000 developing a new process, \)45,000 in legal fees to obtain a patent, and $91,000 to market the process that was patented, all in the year 2017. How should these costs be accounted for in 2017?
Taylor Swift Corporation purchases a patent from Salmon Company on January 1, 2017, for $54,000. The patent has a remaining legal life of 16 years. Taylor Swift feels the patent will be useful for 10 years. Prepare Taylor Swift’s journal entries to record the purchase of the patent and 2017 amortization.
What do you think about this solution?
We value your feedback to improve our textbook solutions.
