QUESTION 1

Sparky, Inc. presented the following select balance sheet accounts for Plant, Property & Equipment as well as Intangibles as of December 31, 2016:

Plant, Property & Equipment:
Equipment (net of Accumulated Depreciation)	$ 305,000
Intangibles:
Patent FJ190X (net of Accumulated Amortization)	$ 162,000

The following information was reported in Sparkys 10K filing as of December 31, 2016:

The equipment was purchased for $450,000 on October 1, 2015. It has an estimated salvage value of $30,000 and an expected service life of six years. Sparky uses the Sum-of-Years-Digits method for this class of asset.

The patent was acquired on January 1, 2016 and at that time had an estimated remaining useful life of 10 years.

During 2017, the following transactions and events may have affected Sparkys long-lived assets:

July 1	Paid $68,000 in legal fees that resulted in the successful defense of the patent. This event did not change the estimated remaining useful life.
Aug 1	Sparky paid $3,800,000 to acquire all of the common stock of Wild Cat, Inc., which became a division of Sparky. Wild Cat reported the following balance sheet at the time of acquisition: Current Assets $1,200,000 Current Liabilities $ 900,000 Plant & Equip (net) 3,800,000 Long-Term Debt 1,100,000 Stockholders Equity 3,000,000
	*On the date of the business combination, it was determined that the fair value of Wild Cats Plant & Equipment was $4,150,000. For all other balance sheet accounts, Wild Cats book value was equal to their fair value.
Dec 31	At year-end, after recording the appropriate depreciation on the equipment, Sparky determined it was necessary to perform an impairment test due to rapid changes in demand for the one and only product this piece of equipment produces. Sparky estimated the future net cash flows of the equipment to be $55,000 per year for the next three years. Sparky intends to continue using the equipment and evaluates PP&E using a discount rate of 15%. (PV of $1, 15%, 3n is .657 and PVOA, 15%, 3n is 2.625)

Using the above information, answer each of the following questions:

Determine Amortization Expense for all of fiscal year 2017 for Patent FJ190X: ________

2 points

QUESTION 2

Determine the amount of Goodwill (if any) Sparky would report on their balance sheet dated December 31, 2017.

2 points

QUESTION 3

Determine the amount of the Impairment Loss (if any) Sparky would report for the Equipment as of December 31, 2017:

2 points

QUESTION 4

Assume that early in 2018, Sparky determined that the equipment will only remain productive through December 31, 2019 and changed to the straight-line method for this asset. The salvage value was determined to be $10,075. Determine Depreciation Expense (if any) Sparky would record for this equipment as of December 31, 2018:

2 points

QUESTION 5

Based on #4 above, if the fair value for the equipment at December 31, 2018 is $80,000, would you need to prepare a journal entry to record the increase in fair value under U.S. GAAP?

		Yes
		No