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Wildhorse Inc. purchased a non - renewable licensing agreement for access to proprietary technology that allows it to produce bio - char from organic waste.
Wildhorse Inc. purchased a nonrenewable licensing agreement for access to proprietary technology that allows it to produce bio
char from organic waste. When the year licensing agreement was purchased years ago there were no other companies operating
in the space. However, numerous competitors have emerged in the industry as direct competitors to Wildhorse Inc. As a result of
recent market entrants, the market demand for its biochar products has been steadily declining. The company has the following
information available related to the licensing agreement:
Licensing agreement at Cost $
Estimated Useful Life
years
Salvage Value
$
Wildhorse Inc. is currently testing this asset for impairment. While the licensing agreement could currently be sold for $
Wildhorse Inc. plans to keep producing the biochar two more years. It expects net cash flows from production to be $ yearly
and that it can sell the licensing agreement for $ at the end of year two. The current interest rate is
Assume that Wildhorse Inc follows ASPE and uses the cost recovery impairment model. Calculate the carrying amount and recoverable amount
Carrying amount of the licensing agreement $
Recoverable amount$
B what is the value of the impairment loss Round answer to decimal places
Impairment loss $
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