Exam 11: Operational Assets: Utilization and Impairment

Granite Enterprises acquired a patent from Southern Research Corporation on 1/1/09 for $4 million. The patent will be used for five years, even though its legal life is 20 years. Rocky Corporation has made a commitment to purchase the patent from Granite for $200,000 at the end of five years. Compute Granite's patent amortization for 2009, assuming the straight-line method is used.

The amount of impairment loss is the excess of book value over:

Wilson Inc. owns equipment for which it paid $70 million. At the end of 2009, it had accumulated depreciation on the equipment of $12 million. Due to adverse economic conditions, Wilson's management determined that it should assess whether an impairment should be recognized for the equipment. The estimated undiscounted future cash flows to be provided by the equipment total $60 million, and the equipment's fair value at that point is $50 million. Under these circumstances, Wilson:

At the end of its 2009 fiscal year, a triggering event caused Janero Corporation to perform an impairment test for one of its manufacturing facilities. The following information is available: The manufacturing facility is:

Using the double-declining balance method, depreciation for 2009 and the book value at December 31, 2009 would be: