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determined by subtracting amortization till the date of incurring legal
cost from the purchase price.
BE12-3 provides us repeated practice to record amortization on
intangible asset


The take away from BE12-7 is how to test goodwill for impairment. We
test goodwill for impairment by comparing the Fair Value (FV) with the
Carrying Value(CV) of the reporting unit. If FV is less than CV then we
proceed further to test goodwill for impairment. 


BRIEF EXERCISE 12-7
Because the fair value of the division exceeds the carrying amount of the
assets, goodwill is not considered to be impaired. No entry is necessary.
BE12-6. This question helped us learn testing an intangible for
impairment. This test involves two steps Recoverability test and Fair
Value Test. In the Recoverability test we compare the Future Cash
Flows and the Carrying Amount of the intangible. Here in this question
the future cash flows of $210,000 are less than the carrying value
therefore there is an impairment. Now we apply the second test to find
the amount of impairment loss by comparing the fair value ($110,000)
with the carrying value (300,000). The impairment loss here is $190,000
( 300,000-110,000). Please note that the intangible is now reported only
at $110,000
BE12-12. Point to note in this question is that the Research and
Development cost of $96,000 is not added to the cost of intangible but
only the legal expenses of n$85,000 to defend the intangible is added.