1. Malrom Manufacturing Company obtained a patent on manufacturing process on January 1, 2006 for $10,000,000. It was expected to have 10 year life and no residual value. Malrom utilizes straight-line amortization for patents. On December 31, 2007, expected future cash flows expected from patent were expected to be $800,000 per year for next eight years. Present value of these cash flows, discounted at Malrom's market interest rate, is $4,800,000. At what amount must the patent be carried on the December 31, 2007 balance sheet?
a. $10,000,000
b. $8,000,000
c. $6,400,000
d. $4,800,000
2. ABC Corporation obtained End-of-the-World Products on January 1, 2008 for $2,000,000, and recorded goodwill of $375,000 as the result of that purchase. At December 31, 2008, End-of-the-World Products Division had fair value of $1,700,000. Net identifiable assets of Division (excluding goodwill) had fair value of $1,450,000 at that time. What amount of loss on impairment of goodwill mustABC record in 2008?
a. $ -0-
b. $125,000
c. $175,000
d. $300,000
3. Fleming Corporation obtained Out-of-Sight Products on January 1, 2008 for $4,000,000, and recorded goodwill of $750,000 as the result of that purchase. At December 31, 2008, the Out-of-Sight Products Division had fair value of $3,400,000. Net identifiable assets of Division (excluding goodwill) had fair value of $2,900,000 at that time. What amount of loss on impairment of goodwill must Fleming record in 2008?
a. $ -0-
b. $250,000
c. $350,000
d. $600,000