Jung Inc Owns a Patent for Which It Paid $66 Million

Multiple Choice

Jung Inc. owns a patent for which it paid $66 million. At the end of 2009, it had accumulated amortization on the patent of $16 million. Due to adverse economic conditions, Jung's management determined that it should assess whether an impairment should be recognized for the patent. The estimated undiscounted future cash flows to be provided by the patent total $43 million, and the patent's fair value at that point is $35 million. Under these circumstances, Lester:

A) Would record no impairment loss on the patent.
B) Would record a $7 million impairment loss on the patent.
C) Would record a $15 million impairment loss on the patent.
D) Would record a $31 million impairment loss on the patent.The patent fails the recoverability test, and the impairment is measured by the difference between its fair value of $35 million and its book value of $50 million ($66 million 16 million) .