B is corrent. If the cost model is used to record intangible assets, the impairment loss is recognized as a loss in the current period. If the cost model is used, a reversal of impairment losses may be recognized in the income statement up to the effects of the impairment loss previously recognized. Therefore, an impairment loss of $10,000 is recognized in year 1, and a gain is recognized in year 2 of $4,000.
A is incorrect. If the cost model is used to record intangible assets, the impairment loss is recognized as a loss in the current period. If the cost model is used, a reversal of impairment losses may be recognized in the income statement up to the effects of the impairment loss previously recognized. Therefore, an impairment loss of $10,000 is recognized in year 1, and a gain is recognized in year 2 of $4,000.
C is incorrect. If the cost model is used to record intangible assets, the impairment loss is recognized as a loss in the current period. If the cost model is used, a reversal of impairment losses may be recognized in the income statement up to the effects of the impairment loss previously recognized. Therefore, an impairment loss of $10,000 is recognized in year 1, and a gain is recognized in year 2 of $4,000.
D is incorrect. If the cost model is used to record intangible assets, the impairment loss is recognized as a loss in the current period. If the cost model is used, a reversal of impairment losses may be recognized in the income statement up to the effects of the impairment loss previously recognized. Therefore, an impairment loss of $10,000 is recognized in year 1, and a gain is recognized in year 2 of $4,000.
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