Impairment of Intangibles
An intangible asset cost $300,000 on January 1, 2008. On January 1, 2009, the asset was evaluated to determine whether it was impaired. As of January 1, 2009, the asset was expected to generate future cash flows of $25,000 per year (at the end of the year). The appropriate discount rate is 5%.
1. Give the entries to record amortization in 2008 and any impairment loss in 2009 assuming that as of January 1, 2008, the asset was assumed to have a total useful life of 10 years and that as of January 1, 2009, there were nine years remaining.
2. Give the entries to record amortization in 2008 and any impairment loss in 2009 assuming that as of January 1, 2008, the asset was assumed to have an indefinite useful life and that as of January 1, 2009, the remaining life was still indefinite.