Question - Presented below is information related to copyrights owned by Botticelli Company at December 31, 2012.
Cost ....................................................................... $8,604,270
Carrying amount ..................................................... $4,371,000
Expected future net cash flows ...................... $3,962,480
Fair value ................................................................. $3,320,080
Assume that Botticelli Company will continue to use the copyright in the future. As of December 31, 2012, the copyright is estimated to have a remaining useful life of 10 years.
Required:
a. Prepare the journal entry (if any) to record the impairment of the asset at December 31, 2012. The company does not use accumulated amortization accounts.
b. Prepare the journal entry to record amortization expense for 2013 related to the copyrights.
c. The fair value of the copyright at December 31, 2013, is $3,520,000. Prepare the journal entry (if any) to record the increase in fair value.