Question

Iconix Brand Group owns and markets various brands and trademarks, including Joe Boxer, London Fog, Ocean Pacific, Ecko Unltd.. Umbro, Ed Hardy, Lee Cooper, Buffalo, and Peanuts. The company's financial statements for the year ended December 31, 2015, indicate the following totals for these trademarks in millions): 2015 $ 1,703 2014 $ 2,016 Trademarks (at cost) Accumulated Amortization Trademarks, net 20 1,696 1,996 During 2015, Iconix acquired the Strawberry Shortcake and Pony trademarks at a cost of $89 million, recorded $3 million of trademark amortization for the year, and disposed of trademarks for proceeds of $3 million cash. Assume none of the trademarks were judged to be impaired during the year. Required: Based on the information given, determine the following for trademarks disposed of during 2015: (a) their cost, (b) their accumulated amortization at the time of disposal, and (c) the gain (loss) on disposal of trademarks. (Enter your answer in millions not in dollars. Loss amounts should be indicated by minus sign.) (a) Cost disposed during 2015 (b) Accumulated Amortization (c) Gain (loss) on disposal of trademarks

Answer 1

Solution :

Details given in Question :

( In Millions)

Particulars	2015	2014
Trademark at Cost	$ 1,703	$ 2,016
Accumlated Amortisation	$ 7	$ 20
Net	$ 1,696	$ 1,996

Cost of Acquired rrademark in 2015 = $ 89 Millions

Amortisation recognised in 2015 = $ 3 Millions

Proceeds recived from dispose of trademark = $ 3 Millions

Let us solve this one by one step

(a) Cost of the trademark disposed off :

Cost of the trademark disosed = Opening Cost + Additional Trademark Cost- Closing balace of cost

= 2016+89-1703

= $ 402 Millions

Hnece cost of the trademark disposed is $ 402 Millions.

(b) Accumalted Amostisation of the trademark disposed off :

Accumlated Amortisation of disposed trademark = Op. Balance of Accumlated Amortisatioon + Amortisation for the year - Closing balace of Closing Balance of Accumlated Amortisation

Therefore;

Accumlated Amortisation of disposed trademark = 20+3-7

= $ 16 Millions

Hence Accumlated Amortisation of trademark disosed off is $ 16 Millions.

(c) Gain or Loss on disposal of trademark

Profit/Los on Trademark = Sales Proceed - Net Cost of Trademark

Here the sales proceeds of Trademark = $ 3 Millions

Net Cost of Trademark = Original Cost - Accumlaed Amortisation of Trademark disposed

= 402-16

= $ 386 Millions

Now we can calcullate Profit/ Loss

Profit/Los on Trademark = Sales Proceed - Net Cost of Trademark

= 3 - 386

= - $ 383 Millions

Since the sales proceeds is lower than original cost, It is a loss of $ 383 Millions.

We can summarize it in the follwing table :

(a)	Cost disposed during 2015	$ 402 Millions
(b)	Accumlated amortisation on trademark disposed	$ 16 Millions
(c)	Profit / (Loss) on disposal of trademark	- $ 383 Millions