Montana matt's Golf Inc. was formed on July 1st 2006, when Matt Magilke purchased the old master golf company. Old master provides video golf instruction at Kioks in shopping malls. Magilke plans to integrate the instruction business into his golf equipment and access only stores.
Magilke paid, $750,000, cash for an old master. At the time old master's balance sheet reported assets of $650,000 and liabilities of $200,000 (thus equity owner's equity was $450,000). The fair value of old Master's assets is estimated to be $800,000.
Included in the assets is the old master trade name with a fair value of $10,000 and a copyright on some instructional books with a value of $20,000. The trade name has a remaining life of 5 years and can be renewed at nominal cost indefinitely. The copyright has a remaining life of 40 years.
A.)Prepare the intangible assets section of Montana Matts Golf Inc., at December 31, 2006. How much amortization expense is included in Montana Matt's income for the year ended December 31, 2006? Show all supporting Computations.
B.)Prepare the journal entry to record amortization expense for 2007. Prepare the intangible assets section on Montana Matt's Golf Inc. at December 31, 2007. No impairments are required to be recorded in 2007.
C.)At the end of 2008, Magilke is evaluating the results of the instructional business. Due to fierce competition from online and television(e.g. the Golf channel), the old Master's reporting unit has even losing money. It's book value is now $500,000 the fair value of the old master reporting unit is $430,000. The implied value of goodwill is $80,000. Magilke has collected the following information related to the company's intangible assets.
Intangible Asset Expected Cash Fair values
Trade Name $9,000 $3,000
Copyright $30,000 $25,000
Prepare the journal entries required, if any, to record impairments on Montana matt's intangible assets.
(Assume that any amortization for 2008 has been recorded)
Show supporting computations.© BrainMass Inc. brainmass.com June 3, 2020, 11:11 pm ad1c9bdddf
Montana Matts Golf, Inc.
As of December, 31, 2006
Trade name 9,000
Fair value of equity: 800,000-200,000=600,000
The solution provides accounting for impairments of intangible assets.