Beckingham sports is an american sporting goods company. based on a $400,000 market study and a $600,000 feasibility opinion concluded last year, beckingham believe it can increase its annual operating cash flow by $3,000,000 by opening new overseas locations. in preparation for the expansion, the firm spent $2,000,000 to purchase land for a new factory. however, they just received an offer of $3,000,000 for the land purchased for the new factory. beckingham is now ready to make a final decision on the international expansion. of the outlays mentioned, which are relevant for capital budgeting purposes?
$400,000 for the market study
$600,000 for the consulting
$2,000,000 to purchase the new land
$3,000,000 of the offer price of the land.
none of the above

Explanation:

Date              Accounts titles and Explanation      Debit         Credit

Dec 31, 2020  Loss on Impairment                 1,090,000  

                       Copyrights                                                        1,090,000

                      (To record the loss on impairment of copyrights)

Dec 31, 2021    Amortization expense                   332,000  

                       Copyrights                                                           332,000

                       (To record the amortization on copyrights)

Dec 31, 2021     No entry  

Explanation

1. Loss on Impairment = Carrying value - Fair value

= $4,410,000 - $3,320,000 = $1,090,000

2. Amortization expense = (Carrying amount - Loss on impairment) / Useful Life

= ($4,410,000 - $1,090,000) / 10 years = $332,000