Answer:
The amount of the impairment loss to be recorded is $6,800.
Explanation:
Note: This question is not complete. The complete question is therefore provided before answering the question as follows:
On January 1, 2020, Starn Tool & Manufacturing Company purchased a copyright for $31,000 cash. It is estimated that the copyrighted item will have no value by the end of 10 years.
Assume that on January 2, 2022, the copyrighted item was impaired in its ability to continue to produce strong revenues. The other intangible assets were not affected. Starn estimated that the copyright would be able to produce future cash flows of $22,100. The fair value of the copyright was determined to be $21,100. Compute the amount, if any, of the impairment loss to be recorded.
The explanation of the answer is now provided as follows:
Amortization expenses for 2020 = Annual amortization expense = Copyright cost / Estimated useful life of the copyright = $31,000 / 10 = $3,100
Book value of copyright on January 2, 2022 = Copyright cost - Amortization expenses for 2020 = $31,000 - $3,100 = $27,900
Copyright fair value = $21,100
Impairment loss = Book value of copyright on January 2, 2022 - Copyright fair value = $27,900 - $21,100 = $6,800
Therefore, the amount of the impairment loss to be recorded is $6,800.
