Long-term assets that are useful in the operations of a business, are not held for sale, and are without physical qualities. During the current year ended December 31 are as follows:

a. Timber rights on a tract of land were purchased for $3,461,120 on February 22. The stand of timber is estimated at 5,408,000 board feet. During the current year, 1,028,300 board feet of timber were cut and sold.
b. On December 31, the company determined that $3,640,000 of goodwill. An intangible asset that is created from such favorable factors as location, product quality, reputation, and managerial skill.
c. Governmental and legal costs of $6,108,000 were incurred on April 3 in obtaining a patent. Exclusive rights to produce and sell goods with one or more unique features.

Required:

1. Determine the amount of the amortization, depletion, or impairment for the current year for each of the foregoing items.
2. Journalize the adjusting entries required to record the amortization, depletion, or impairment for each item. Refer to the Chart of Accounts for exact wording of account titles.

Solution and Explanation:

1  Amount of depletion, impairment and amortization for the current year  

A  Cost of timber rights on a tract of land  $3,461,120  

Estimated stand of timber           5,408,000  

Cost of depletion per board feet (3461120 divided by 5408000)  $0.64  

Current year depletion charges for 1,028,300 board feet  $658,112    

B  Impairment loss  $3,640,000      

C  Cost of Patent  $6,108,000  

Estimated economic life  10 years  

Amortization period                  3/4  

Amortization  $458,100      

2  Adjusting entries  

Account Titles                       Debit         Credit

a  Depletion expense             $658,112  

Accumulated depletion                   $658,112    

b  Loss from Impaired Goodwill  $3,640,000  

Goodwill                                              $3,640,000    

c  Amortization expense-Patents  $458,100  

Patents                                                         $458,100

answer; /// i believe the correct answers are (b) change in population and (e) future expectation of check first, good luck

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