Evers Company's balance sheet shows a trade name acquired as part of a business combination with a carrying value of $60 million.The trade name has an indefinite life and therefore Evers does not amortize it.Negative publicity regarding the product carrying the trade name has reduced its fair value to $48 million and its value in use to $44 million.The entry is as follows:
A)Loss on Impairment ..................................16,000,000
Trade Name ............................................16,000,000

B)Loss on Impairment ...................................12,000,000
Trade Name ............................... .............12,000,000

C)Loss on Impairment ...................................8,000,000
Trade Name ..............................................8,000,000

D)Trade Name ........................................12,000,000
Loss on Impairment .......................................12,000,000

E)Trade Name ........................................16,000,000
Loss on Impairment ...................................... .16,000,000

Question

Evers Company's balance sheet shows a trade name acquired as part of a business combination with a carrying value of $60 million.The trade name has an indefinite life and therefore Evers does not amortize it.Negative publicity regarding the product carrying the trade name has reduced its fair value to $48 million and its value in use to $44 million.The entry is as follows:
A)Loss on Impairment ..................................16,000,000 
Trade Name ............................................16,000,000

B)Loss on Impairment ...................................12,000,000 
Trade Name ............................... .............12,000,000

C)Loss on Impairment ...................................8,000,000 
Trade Name ..............................................8,000,000

D)Trade Name ........................................12,000,000 
Loss on Impairment .......................................12,000,000

E)Trade Name ........................................16,000,000 
Loss on Impairment ...................................... .16,000,000

Quizplus · Accepted Answer

According to the information provided, the fair value of the trade name has decreased to $48 million, which is $12 million less than its carrying value of $60 million. Therefore, a loss on impairment of $12 million should be recognized, and the carrying value of the trade name should be reduced to $48 million. Choice B correctly reflects this entry.

Evers Company's Balance Sheet Shows a Trade Name Acquired as Part