Question
Jung Inc. owns a patent for which it paid $72 million. At the end of 2018, it had accumulated amortization on the patent of $19
Jung Inc. owns a patent for which it paid $72 million. At the end of 2018, it had accumulated amortization on the patent of $19 million. Due to adverse economic conditions, Jung's management determined that it should assess whether an impairment loss should be recognized for the patent. The estimated undiscounted future cash flows to be provided by the patent total $41 million, and the patent's fair value at that point is $33 million. Under these circumstances, Lester:
a. Would record a $39 million impairment loss on the patent.
b. Would record a $20 million impairment loss on the patent.
c. Would record a $8 million impairment loss on the patent.
d. Would record no impairment loss on the patent.
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