SMC Research Associates reports the following intangible assets on its December 31 balance sheet:

It does not use a separate accumulated amortization account for the intangible assets ( i. e., it deducts the amount of amortization directly from the intangible asset account).
Management provided the following information related to intangible assets it obtained during the cur-rent year:
€¢ Franchise: Due to current market conditions, products sold under the franchise have experienced significant sales declines from possible obsolescence.
€¢ Patent: SMC is currently involved in litigation that will determine if the company has the exclusive right to sell the patented product. Legal counsel informed SMC that the value of the patent will likely be reduced.
€¢ Trade name: The company is required to test for impairment of its indefinite- life intangible assets annually.
SMC€™s cost of capital is 6%. Management estimates the following future cash flows to be generated over the next five years from the use of its intangible assets:

Required
a. Compute the impairment loss (if any) for each intangible asset.
b. Prepare the journal entry necessary to record the impairment loss.
c. Assuming that SMC amortizes its finite- life intangible assets using the straight- line method, with no scrap value, prepare the journal entry to record the annual amortization for the first year subsequent to the impairment write- down.

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Intangible Asset Franchise Patent Trada name Net Carrying Value S 850,000 Remaining Life 5 years 3 years NIA 400,000 3,950,000 $5.200,000 Total Future Period Year 1 Year 2 Year 3 Year 4 Year 5 Total Franchise $300,000 220,000 110,000 45,000 25,000 $700,000 Patent Trade Name $280,000 90,000 10,000 $ 800,000 610,000 590,000 510,000 365,000 S2.875.000 $380,000