Impaired Goodwill and Amortization of Patent

On April 1, a patent with an estimated useful economic life of 12 years was acquired for $100,800. In addition, on December 31, it was estimated that goodwill of $29,500 was impaired.

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a. Record the acquisition of patent. If an amount box does not require an entry, leave it blank.

April 1	Accumulated DepletionAmortization ExpenseCashDepletion ExpensePatentsPatents	Patents	Patents
	Accumulated DepletionAmortization ExpenseCashDepletion ExpenseDepreciation ExpenseCash	Cash	Cash

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Recall that goodwill is not amortized because its useful life is indefinite.

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b. Journalize the adjusting entry on December 31 for the amortization of the patent rights. Do not round intermediate calculations. If an amount box does not require an entry, leave it blank.

Dec. 31	Accumulated DepletionAmortization Expense-PatentsCashDepletion ExpenseDepreciation ExpenseAmortization Expense-Patents	Amortization Expense-Patents	Amortization Expense-Patents
	Amortization ExpenseCashDepletion ExpenseDepreciation ExpensePatentsPatents	Patents	Patents

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A separate contra asset account is usually not used for intangible assets. Pay close attention to the date of purchase.

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c. Journalize the adjusting entry on December 31 for the impaired goodwill. If an amount box does not require an entry, leave it blank.

Dec. 31	Accumulated DepletionAmortization ExpenseCashDepletion ExpenseDepreciation ExpenseGoodwillLoss from Impaired GoodwillLoss from Impaired Goodwill	Loss from Impaired Goodwill	Loss from Impaired Goodwill
	Accumulated DepletionAmortization ExpenseCashDepletion ExpenseDepreciation ExpenseGoodwillLoss from Impaired GoodwillGoodwill	Goodwill	Goodwill

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Goodwill is not amortized like other intangible assets. If Goodwill is impaired, a loss should be recorded.

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Partially correct