Answer:
The amortization expense is $1,200,000.
Explanation:
There are three intangible assets involved: patent, trademark, and goodwill.
Goodwill is not amortized but is tested for impairment each year. Moreover, Burger Mania's policy is to amortize intangible assets with finite useful lives only. This means that trademark is also not amortized as it is considered to have an indefinite useful life. Hence, only patent has to be amortized.
Burger Mania's amortization method is the straight-line method, no residual value, and a five-year service life. Hence,
Amortization expense = Asset value / Useful life
= $6,000,000 / 5 years
= $1,200,000
Hence, amortization expense worth $1,200,000 shall appear in Burger Mania's income statement for the first year ended December 31.
Answer:
The impairment expense that would appear in Burger Mania's income statement for the year ended December 31st is $1,200,000
Explanation:
The patient of $6 million is meant to be amortized as it has a five-year service life.
The trademark of $4 million has indefinite useful life, hence could not be amortized.
The $6 million goodwill is meant to be tested for impairment annually,however there no further details provided in the question to enhance the impairment testing,as a result it is left at its value of $6 million with no amortization or impairment recorded against it.
Impairment expense=patient value/service life
patient's value is $6,000,000
patient service life is 5 years
impairment expense on patient =$6000,000/5 years
impairment expense on patient=$1,200,000
