Answered

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Sunland Corp. obtained a trade name in January 2019, incurring legal costs of $69,840. The company amortizes the trade name over 8 years. Sunland successfully defended its trade name in January 2020, incurring $19,012 in legal fees. At the beginning of 2021, based on new marketing research, Sunland determines that the fair value of the trade name is $58,200. Estimated future net cash flows from the trade name are $62,080 on January 4, 2021. Prepare the necessary journal entries for the years ending December 31, 2019, 2020, and 2021

Sagot :

ayokenny2001

Answer:

See below

Explanation:

2019

December 31

Amortization expense - Trade name $8,730

Trade name $8,730

($69,840 ÷ 8)

2020

December 31

Amortization expense - Trade name $11,446

Trade name

$11,446

[($69,840 - $8,730 + $19,012) ÷ 7 years ]

2021

December 31

Loss on impairment

$10,476

Trade name

$10,476

Carrying value ($69,840 - $8,730 + $19,012 - $11,446)

$68,676

Less recoverable amount

($58,200)

Loss on impairment

$10,476

2021

December 31

Amortization expense - Trade name

$9,700

Trade name

$9,700

[$58,200 ÷ 6 years]

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