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Intangible Assets and Goodwill: Amortization and Impairment In early 2011, Bowen Company acquired a new business unit in a merger. Allocation of the acquisition cost

Intangible Assets and Goodwill: Amortization and Impairment

In early 2011, Bowen Company acquired a new business unit in a merger. Allocation of the acquisition cost resulted in fair values assigned as follows:

Intangible Asset Fair Value Estimated Value
Customer lists $300,000 5 years
Developed technology 480,000 10 years
Internet domain name 780,000 Indefinite
Goodwill* 3,720,000 Indefinite

* The goodwill is assigned entirely to the aquired business unit.

Impairment reviews at the end of 2011 and 2012 did not identify any impairment losses. After the business suffered a downturn during 2013, the year-end impairment review yielded the following information:

  1. Customer lists are estimated to have undiscounted future cash flows of $150,000 and discounted future cash flows of $108,000.
  2. Developed technology is estimated to have undiscounted future cash flows of $300,000 and discounted future cash flows of $252,000.
  3. The internet domain name is estimated to have undiscounted future cash flows of $600,000 and discounted future cash flows of $450,000.
  4. Because of the economic downturn, Bowen bypassed qualitative assessment of the business unit. The acquired business unit has a fair value of $10,200,000, and a carrying amount of $11,000,000.

Determine Bowen's amortization expense and impairment write-offs for 2013.

Summary:
Amortization expense for 2013:
Customer lists Answer
Developed technology Answer
Total Answer
Impairment writeoffs for 2013:
AnswerDeveloped technologyCustomer listsN/A Answer
Internet domain name Answer
Goodwill Answer
Total Answer

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