Question
Intangible Assets and Goodwill: Amortization and Impairment In early 2015, Bowen Company acquired a new business unit in a merger. Allocation of the acquisition cost
Intangible Assets and Goodwill: Amortization and Impairment
In early 2015, 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 | $500,000 | 5 years |
Developed technology | 800,000 | 10 years |
Internet domain name | 1,300,000 | Indefinite |
Goodwill* | 6,200,000 | Indefinite |
* The goodwill is assigned entirely to the acquired business unit.
Impairment reviews at the end of 2015 and 2016 did not identify any impairment losses. After the business suffered a downturn during 2017, the year-end impairment review yielded the following information:
Customer lists are estimated to have undiscounted future cash flows of $250,000 and discounted future cash flows of $180,000.
Developed technology is estimated to have undiscounted future cash flows of $500,000 and discounted future cash flows of $420,000.
The internet domain name is estimated to have undiscounted future cash flows of $1,000,000 and discounted future cash flows of $750,000. Qualitative assessment indicates that it is more likely than not that the internet domain name is impaired.
Because of the economic downturn, Bowen bypassed qualitative assessment of the business unit (Step 0). The acquired business unit has a fair value of $17,000,000, a carrying amount of $18,500,000, and the fair value of its identifiable net assets is $14,200,000.
Required
Determine Bowen's amortization expense and impairment write-offs for 2017.
Summary: | |
---|---|
Amortization expense for 2017: | |
Customer lists | $Answer
|
Developed technology | Answer
|
Total | $Answer
|
Impairment write offs for 2017: | |
AnswerDeveloped technologyCustomer listsN/A
| $Answer
|
Internet domain name | Answer
|
Goodwill | Answer
|
Total | $Answer
|
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started