Concept #1: Asset Impairment

Practice: Sprinting Printers, Inc. purchased a patent on a high-tech laser printer for $750,000. The patent gives legal protection for twenty years, but Sprinting Printers believes that competitors will be able to mimic its capabilities in fifteen years. SP uses the straight-line method when amortizing the printer. After ten years, SP discovers that a competitor has created a more efficient holo-printer. At this point, SP determines that the estimated future cash flows of the printer are $200,000. The fair value of the patent is zero on the open market. The entry to record the discovery of the new holo-printer would include: