After first recording any impairment losses on plant and equipment and the patent. Required: 1. Compute the book value of the plant and equipment and patent at the end of 2024. 2. When should the plant and equipment and the patent be tested for impairment? 3. When should goodwill be tested for impairment? 4. Determine the amount of any impairment loss to be recorded, if any, for the three assets. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Compute the book value of the plant and equipment and patent at the end of 2024. Note: Enter your answers in millions. Plant and equipment Patent Book Value million million Required 4 < Required 1 Required 2 >
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- On May 1, 2015, Zoe Inc. purchased Branta Corp. for $15,000,000 in cash. They only received $12,000,000 in net assets. In 2016, the market value of the goodwill obtained from Branta Corp. was valued at $4,000,000, but in 2017 it dropped to $2,000,000. Prepare the journal entry for the creation of goodwill and the entry to record any impairments to it in subsequent years.Bliss Company owns an asset with an estimated life of 15 years and an estimated residual value of zero. Bliss uses the straight -line method of depreciation. At the beginning of the sixth year, the assets book value is 200,000 and Bliss changes the estimate of the assets life to 25 years, so that 20 years now remain in the assets life. Explain how this change will be accounted for in Blisss financial statements, and compute the current and future annual depreciation expense.The following intangible assets were purchased by Goldstein Corporation: A. A patent with a remaining legal life of twelve years is bought, and Goldstein expects to be able to use it for seven years. B. A copyright with a remaining life of thirty years is purchased, and Goldstein expects to be able to use it for ten years. For each of these situations, determine the useful life over which Goldstein will amortize the intangible assets.
- Gray Companys financial statements showed income before income taxes of 4,030,000 for the year ended December 31, 2020, and 3,330,000 for the year ended December 31, 2019. Additional information is as follows: Capital expenditures were 2,800,000 in 2020 and 4,000,000 in 2019. Included in the 2020 capital expenditures is equipment purchased for 1,000,000 on January 1, 2020, with no salvage value. Gray used straight-line depreciation based on a 10-year estimated life in its financial statements. As a result of additional information now available, it is estimated that this equipment should have only an 8-year life. Gray made an error in its financial statements that should be regarded as material. A payment of 180,000 was made in January 2020 and charged to expense in 2020 for insurance premiums applicable to policies commencing and expiring in 2019. No liability had been recorded for this item at December 31, 2019. The allowance for doubtful accounts reflected in Grays financial statements was 7,000 at December 31, 2020, and 97,000 at December 31, 2019. During 2020, 90,000 of uncollectible receivables were written off against the allowance for doubtful accounts. In 2019, the provision for doubtful accounts was based on a percentage of net sales. The 2020 provision has not yet been recorded. Net sales were 58,500,000 for the year ended December 31, 2020, and 49,230,000 for the year ended December 31, 2019. Based on the latest available facts, the 2020 provision for doubtful accounts is estimated to be 0.2% of net sales. A review of the estimated warranty liability at December 31, 2020, which is included in other liabilities in Grays financial statements, has disclosed that this estimated liability should be increased 170,000. Gray has two large blast furnaces that it uses in its manufacturing process. These furnaces must be periodically relined. Furnace A was relined in January 2014 at a cost of 230,000 and in January 2019 at a cost of 280,000. Furnace B was relined for the first time in January 2020 at a cost of 300,000. In Grays financial statements, these costs were expensed as incurred. Since a relining will last for 5 years, Grays management feels it would be preferable to capitalize and depreciate the cost of the relining over the productive life of the relining. Gray has decided to nuke a change in accounting principle from expensing relining costs as incurred to capitalizing them and depreciating them over their productive life on a straight-line basis with a full years depreciation in the year of relining. This change meets the requirements for a change in accounting principle under GAAP. Required: 1. For the years ended December 31, 2020 and 2019, prepare a worksheet reconciling income before income taxes as given previously with income before income taxes as adjusted for the preceding additional information. Show supporting computations in good form. Ignore income taxes and deferred tax considerations in your answer. The worksheet should have the following format: 2. As of January 1, 2020, compute the retrospective adjustment of retained earnings for the change in accounting principle from expensing to capitalizing relining costs. Ignore income taxes and deferred tax considerations in your answer.The following intangible assets were purchased by Hanna Unlimited: A. A patent with a remaining legal life of twelve years is bought, and Hanna expects to be able to use it for six years. It is purchased at a cost of $48,000. B. A copyright with a remaining life of thirty years is purchased, and Hanna expects to be able to use it for ten years. It is purchased for $70,000. Determine the annual amortization amount for each intangible asset.At the beginning of 2022, Metatec Incorporated acquired Ellison Technology Corporation for $590 million. In addition to cash, receivables, and inventory, the following assets and their fair values were also acquired: Plant and equipment (depreciable assets) Patent Goodwill The plant and equipment are depreciated over a 10-year useful life on a straight-line basis. There is no estimated residual value. The patent is estimated to have a five-year useful life, no residual value, and is amortized using the straight-line method. At the end of 2024, a change in business climate indicated to management that the assets of Ellison might be impaired. The following amounts have been determined: Plant and equipment: Undiscounted sum of future cash flows Fair value Patent: Undiscounted sum of future cash flows Fair value Goodwill: Fair value of Ellison Technology Corporation Book value of Ellison's net assets (excluding goodwill) Book value of Ellison's net assets (including goodwill) Required 1 $…
- At the beginning of 2022, Metatec Incorporated acquired Ellison Technology Corporation for $630 million. In addition to cash, receivables, and inventory, the following assets and their fair values were also acquired: Plant and equipment (depreciable assets) Patent Goodwill The plant and equipment are depreciated over a 10-year useful life on a straight-line basis. There is no estimated residual value. The patent is estimated to have a five-year useful life, no residual value, and is amortized using the straight-line method. $ 153 million 43 million 100 million At the end of 2024, a change in business climate indicated to management that the assets of Ellison might be impaired. The following amounts have been determined: Plant and equipment: Undiscounted sun of future cash flows Fair value Patent: Undiscounted sum of future cash flows Fair value $ 83 million 63 million $ 20 million 13 million Goodwill: Fair value of Ellison Technology Corporation Book value of Ellison's net assets…At the beginning of 2022, Metatec Incorporated acquired Ellison Technology Corporation for $590 million. In addition to cash, receivables, and inventory, the following assets and their fair values were also acquired: Plant and equipment (depreciable assets) $ 149 million Patent 39 million Goodwill 120 million The plant and equipment are depreciated over a 10-year useful life on a straight-line basis. There is no estimated residual value. The patent is estimated to have a five-year useful life, no residual value, and is amortized using the straight-line method. At the end of 2024, a change in business climate indicated to management that the assets of Ellison might be impaired. The following amounts have been determined: Plant and equipment: Undiscounted sum of future cash flows $ 79 million Fair value 59 million Patent: Undiscounted sum of future cash flows $ 20 million Fair value 13 million Goodwill: Fair value of Ellison Technology Corporation $…At the beginning of 2022, Metatec Incorporated acquired Ellison Technology Corporation for $590 million. In addition to cash, receivables, and inventory, the following assets and their fair values were also acquired: Plant and equipment (depreciable assets) $ 149 million Patent 39 million Goodwill 120 million The plant and equipment are depreciated over a 10-year useful life on a straight-line basis. There is no estimated residual value. The patent is estimated to have a five-year useful life, no residual value, and is amortized using the straight-line method. At the end of 2024, a change in business climate indicated to management that the assets of Ellison might be impaired. The following amounts have been determined: Plant and equipment: Undiscounted sum of future cash flows $ 79 million Fair value 59 million Patent: Undiscounted sum of future cash flows $ 20 million Fair value 13 million Goodwill: Fair value of Ellison Technology Corporation $…
- At the beginning of 2019, Metatec Inc. acquired Ellison Technology Corporation for $580 million. In addition to cash, receivables, and inventory, the following assets and their fair values were also acquired: Plant and equipment (depreciable assets) $148 million Patent Goodwill 38 million 100 million The plant and equipment are depreciated over a 10-year useful life on a straight-line basis. There is no estimated residual value. The patent is estimated to have a 5-year useful life, no residual value, and is amortized using the straight-line method. At the end of 2021, a change in business climate indicated to management that the assets of Ellison might be impaired. The following amounts have been determined: Plant and equipment: Undiscounted sum of future cash flows Fair value Patent: Undiscounted sum of future cash flows Fair value Goodwill: Fair value of Ellison Technology Corporation Fair value of Ellison's net assets (excluding goodwill) Book value of Ellison's net assets…At the beginning of 2016, Metatec Inc. acquired Ellison Technology Corporation for $600 million. In addition tocash, receivables, and inventory, the following assets and their fair values were also acquired:Plant and equipment (depreciable assets) $150 millionPatent 40 millionGoodwill 100 millionThe plant and equipment are depreciated over a 10-year useful life on a straight-line basis. There is no estimated residual value. The patent is estimated to have a 5-year useful life, no residual value, and is amortizedusing the straight-line method.At the end of 2018, a change in business climate indicated to management that the assets of Ellison might beimpaired. The following amounts have been determined:Plant and equipment:Undiscounted sum of future cash flows $ 80 millionFair value 60 millionPatent:Undiscounted sum of future cash flows $ 20 millionFair value 13 millionGoodwill:Fair value of Ellison Technology Corporation $450 millionFair value of Ellison’s net assets (excluding goodwill)…Booster Co purchased a building on 1 January 2010 for P1,250,000. At acquisition, the useful life of the building was 50 years. Depreciation is calculated on the straight-line basis. On 1 January 2020, the building was revalued to P1,600,000. Booster Co has a policy of transferring the excess depreciation on revaluation from the revaluation surplus to retained earnings. Assuming no further revaluations take place, what is the balance on the revaluation surplus at 31 December 2020?