Dustin's Donuts experienced a decrease in the value of the trademark of a company it acquired two years ago.This reduction in value results in:
A)an impairment charge.
B)depreciation expense.
C)an operating expense.
D)goodwill.

Question

Quizplus · Accepted Answer

When there is a decrease in the value of an intangible asset like a trademark, it results in an impairment charge. The impairment charge reflects the decrease in the value of the asset and is recorded as an expense on the income statement. Depreciation expense is applicable to tangible assets and not intangible assets like trademarks. Operating expenses are costs incurred in the ordinary course of business, whereas the impairment charge is a one-time adjustment. Goodwill is the excess of the purchase price over the fair value of the net assets acquired in a business combination and is not related to the decrease in the value of the trademark.

Dustin's Donuts Experienced a Decrease in the Value of the Trademark