Problem #2: Impairment of Intangible Assets (20 points) At December 31, 2018, Pesky Corp. and its Subsidiaries reported the following intangible assets in its consolidated balance sheet PRIOR to the consideration of the possible impairment of the assets: Carrying Value $1,800,000 $5,200,000 Product Patents Goodwill Pesky Corp. estimated its cost of capital to be 11 %. The product patents were acquired by Pesky Corp. in mid-2016 through a merger with Stevens Inc. The patents were initially recognized at a cost of $2,400,000 and were expected to have a remaining useful life of six years. At December 31, 2018, Pesky Corp. estimated the product patents would generate annual cash flows of $550,000 over the next three years 1. Perform the initial screening test required by GAAP to determine whether or not the product patents were impaired at December 31, 2018. (4 points) a. If you determined that the product patents were impaired at December 31, 2018, prepare b. the journal entry that Pesky Corp. recorded to properly recognize the impairment loss. (4 points) DATE ACCOUNT NAMES DEBIT CREDIT SUPPORTING CALCULATION REQUIRED: Prepare the adjusting journal entry that Pesky Corp. recorded on December 31, 2019 to amortize the product patents. (4 points) C. CREDIT DEBIT ACCOUNT NAMES DATE SUPPORTING CALCULATION REQUIRED: Pesky Corp. recognized goodwill when it acquired a controlling interest in Stars Inc. in 2006. At December 31, 2018, Pesky Corp. determined that it was more likely than not that the fair value of the Stars Inc. was less than the carrying value of its net assets. 2. At December 31, 2018 Pesky Corp. determined the fair value of Stars Inc. to be $24,000,000. An analysis of the net identifiable assets of Stars Inc. at that time revealed: Carrying Value Current Assets $9,000,000 Long-term Assets other than Goodwill 34,000,000 5,200,000 6,000,000 17,000,000 Goodwill Current Liabilities Long-term Liabilities If the goodwill was impaired at December 31, 2018, present the calculation required to determine the amount of the goodwill impairment loss and prepare the journal entry recorded by Pesky Corp. to recognize the loss. (s points) DATE ACCOUNT NAMES DEBIT CREDIT SUPPORTING CALCULATION REQUIRED