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23 September, 21:51

Bramble Corporation owns a patent that has a carrying amount of $300,000. Bramble expects future net cash flows from this patent to total $240,000. The fair value of the patent is $163,000. Prepare Bramble's journal entry to record the loss on impairment

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  1. 23 September, 22:17
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    The journal entry for recording the loss on the impairment is shown below:

    Explanation:

    Loss on Impairment A/c ... Dr $137,000

    Patent A/c ... Cr $137,000

    For recording the impairment, the loss or expense on the impairment is debit Therefore, loss on impairment is debited and the underlying asset is credited. So, the Patent account is credited.

    Working note:

    Impairment loss = Carrying amount - Fair value

    where

    Carrying amount is $300,000

    fair value is $163,000

    So,

    = $300,000 - $163,000

    = $137,000
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