Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Part B. Sky Corp.'s satellite division has one equipment and one patent internally generated from research-and-development. On December 1, 2018, the beginning balance of the

Part B. Sky Corp.'s satellite division has one equipment and one patent internally generated from research-and-development. On December 1, 2018, the beginning balance of the accounts related to the equipment and the patent is as follows:

Equipment (at cost)

$1,000,000

Accumulated depreciation - Equipment

$100,000

Patent (at cost)

$800,000

Accumulated amortization - Patents

$200,000

The equipment and the patent have never been impaired in the past. Annual depreciation expense for the equipment is $50,000, and annual amortization expense for the patent is $25,000. On December 31, 2018, the equipment has a Fair Value Less Cost of Disposal (FVLCD) of $900,000 and a Value-in-Use (VIU) of $800,000. The patent does not have an active market but the company has determined its VIU to be $550,000 at the end of 2018. Sky Corp. uses the cost model to for the subsequent measurement of both the equipment and the patent.

(a) Show the procedure to decide whether Sky Corp. should impair the equipment and the patent. If yes, calculate the impairment loss. (2')

(b) Please provide the journal entries related to the equipment and the patent at the end of 2018. (6')

For the year of 2019, the patent's amortization expense is $20,000. As of the end of 2019, the equipment has a FVLCD of $750,000 and a VIU of $700,000. The patent has a VIU of $560,000.

(c) Please provide the journal entries related to the equipment and the patent at the end of 2019. (8')

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial & Managerial Accounting

Authors: Jan Williams

16th Edition

78111048, 978-0078111044

More Books

Students also viewed these Accounting questions

Question

Go, do not wait until I come

Answered: 1 week ago

Question

Make eye contact when talking and listening

Answered: 1 week ago

Question

Do not go, wait until I come

Answered: 1 week ago