Question

Intangible Assets and Goodwill: Amortization and Impairment In early 2011, Bowen Company acquired a new business unit in a merger. Allocation of the acquisition cost resulted in fair values assigned as follows:
Intangible Asset Fair Value Estimated Value
Customer lists $400,000 5 years
Developed technology 640,000 10 years
Internet domain name 1,040,000 Indefinite
Goodwill 4,960,000 Indefinite

The goodwill is assigned entirely to the acquired business unit. Impairment reviews at the end of 2011 and 2012 did not identify any impairment losses. After the business suffered a downturn during 2013, the year-end impairment review yielded the following information: Customer lists are estimated to have undiscounted future cash flows of $200,000 and discounted future cash flows of $144,000.

The internet domain name is estimated to have undiscounted future cash flows of $800,000 and discounted future cash flows of $600,000. The acquired business unit has a fair value of $13,600,000, a carrying amount of $14,800,000, and the fair value of its identifiable net assets is $11,360,000.

Required:
Determine Bowen's amortization expense and impairment write-offs for 2013.

Answer 1

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