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Alex Clayton Ltd., an IFRS reporter, is in the process of assessing the valuation of its intangible assets. At the end of the current year,

Alex Clayton Ltd., an IFRS reporter, is in the process of assessing the valuation of its intangible assets. At the end of the current year, management reported the following intangible assets:

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Additional information regarding the intangible assets follows:

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Requirement a. Conduct an impairment test for Alex Clayton's intangible assets. Start with Part 1. (Complete all answer boxes.)

Part 1:

Trademark

Franchise

Permit

Recoverable amount

Now complete Part 2. For each asset group, complete the analysis and calculate the amount of the impairment, if any. (If there is no impairment loss, leave the impairment loss cell blank for that asset.)

Part 2:

Trademark

Franchise

Permit

Impairment loss

Requirement b. Prepare the journal entries required to record the impairment loss, if any. (Record debits first, then credits. Exclude explanations from any journal entries. If no entry is required select "No Entry Required" on the first line of the journal entry table and leave all remaining cells in the table blank.)

Begin by preparing the journal entry required to record impairment loss, if any, on the trademark.

Account

Date of impairment

Prepare the journal entry required to record impairment loss, if any, on the franchise.

Account

Date of impairment

Prepare the journal entry required to record impairment loss, if any, on the permit.

Account

Date of impairment

Requirement c. Compute the amount of the annual amortization for the franchise for years subsequent to the impairment test. (Round your answer to the nearest whole dollar.)

The amount of the amortization for the franchise for years subsequent to the impairment test is $

annually.

Description Trademark Franchise Permit Cost $ 650,000 $ (0) 580,000 $ (232,000) 140,000 (0) Accumulated amortization $ 650,000 $ Net book value at year end 348,000 $ 140,000 Print Done The firm acquired the franchise 2 years ago and estimates that it has a 5-year useful life with no residual value. The permit is renewable every 3 years for an indefinite period of time. Alex Clayton's management is concerned about the value of its franchise. Sales of the products sold under the franchise agreement have declined over the past 2 years, prompting the company to test for impairment. The firm classifies the trademark and the renewable permit as indefinite-life intangible assets and is required to test them for impairment on an annual basis. Management provides the following estimates related to each of its intangible assets: Trademark Franchise Permit Fair value $ 600,000 $ 328,000 $ 143,000 Costs to sell 3,000 10,000 1,000 Fair value less costs to sell 597,000 318,000 142,000 Value in use 620,000 303,000 149,000

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