Presented below is information related to copyrights owned by Walter de la Mare Company at December 31, 2007.
Cost $8,600,000
Carrying amount 4,300,000
Expected future net cash flows 4,000,000
Fair value 3,200,000
Assume that Walter de la Mare Company will continue to use this copyright in the future. As of December 31, 2007, the copyright is estimated to have a remaining useful life of 10 years.
Instructions:
Q1. Prepare the journal entry (if any) to record the impairment of the asset at December 31, 2007. The company does not use accumulated amortization accounts.
Q2. Prepare the journal entry to record amortization expense for 2008 related to the copyrights.
Q3. The fair value of the copyright at December 31, 2008 is $3,400,000. Prepare the journal entry (if any) necessary to record the increase in fair value.