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Life in Years Cost Residual Value Accumulated depreciation / Impairment to Dec 31st, 20X3 Net...

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Accounting

Life in Years Cost Residual Value Accumulated depreciation / Impairment to Dec 31st, 20X3 Net Book value at Dec 31st 20X3
Patent 15 75,000* 0 40,278.00* 34,722.00*

*Reported at its net amount of $34,722 on the statement of financial position

SBC uses the straight-line method to depreciate all depreciable assets. The company takes a half-year of depreciation in the year of acquisition and a half-year of depreciation in the year of disposal.

SBCs patent is considered to be a cash-generating unit as SBC leases (rents out) asset to an outside entity for a royalty fee.

SBC paid $75,000 to acquire a patent in 20X1. In 20X3 SBC wrote down the value of its patent $30,000 as it its value was judged to be impaired due to a competitors copying of the design. During 20X4, SBC spent $13,000 successfully defending its patent. In light of the successful patent defence, SBC now estimates that both the fair value of the patent and its value in use are $69,000. Estimated costs of disposal are $2,000.

Required: Prepare journal entries to record the transactions detailed above including all adjusting entries required at December 31, 20X4. (Depreciation for the year + Reversal of impairment loss)

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