Question
Bridgeport Golf and Sports was formed on July 1, 2020, when Steve Powerdriver purchased Old Master Golf Corporation. Old Master provides video golf instruction at
Bridgeport Golf and Sports was formed on July 1, 2020, when Steve Powerdriver purchased Old Master Golf Corporation. Old Master provides video golf instruction at kiosks in shopping malls. Powerdrivers plan is to make the instruction business part of his golf equipment and accessory stores. Powerdriver paid $650,000 cash for Old Master. At the time of purchase, Old Masters statement of financial position reported assets of $550,000 and liabilities of $100,000 (shareholders equity was $450,000). The fair value of Old Masters identifiable assets was estimated to be $700,000. Included in the identifiable assets was the Old Master trade name with a fair value of $16,490 and a copyright on some instructional books with a fair value of $25,000. The trade name had a remaining legal life of five years and can be renewed indefinitely at nominal cost. The copyright had a remaining life of 40 years.
Assume that Bridgeport Golf and Sports is a public company. The relevant information for the impairment test on December 31, 2022, is as follows:
Provide any associated journal entry for the impairment test.
Trade name Copyright Cash-generating unit to which goodwill was allocated Carrying Amount $16,490 24,696 469,700 Future Net Cash Flows (Undiscounted) $11,220 32,730 477,340 Value in Use $7,430 26,940 458,730 FV - Selling Costs $7,970 25,130 451,600 Date Account Titles and Explanation Debit Credit Dec 31, 2022Step by Step Solution
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