| Course | ACC 422 Intermediate Financial Accounting II (ACC/422) |
|---|---|
| Week | 2 |
| Paper type | Depreciation, impairment and intangibles paper |
| Length | about 1,008 words, 4 double-spaced pages plus title page and references |
| Format | APA 7 student paper |
| School | University of Phoenix |
| Program | BS in Accounting |
| Updated | September 2026 |
Free sample paper for ACC 422 Week 2
After Buying Three Radio Stations: Allocating the Price to Towers, Licenses, Advertiser Relationships and Goodwill, Revising Depreciation and Testing for Impairment
[Student Name]
University of Phoenix
ACC/422: Intermediate Financial Accounting II
Week 2 Assignment
[Instructor Name]
[Date]
The broadcaster, the stations and all figures are composites written for a model paper; accounting rules and research findings come from the sources listed.
A composite media company bought a group of three radio stations in a mid-sized market for $18 million. Two of the stations play country and classic rock, and the third is a news and talk station. The company expected to cut costs by sharing a studio and sales staff and to grow advertising revenue. Almost everything the company paid for is invisible: a right to broadcast, a list of loyal advertisers and an audience that tunes in every morning. This paper accounts for what was bought and follows the assets through their first years.
Allocating the Purchase Price
In a business combination, the buyer records identifiable assets at fair value and records any excess of the price as goodwill. Independent appraisers valued the towers, transmitters and studio equipment at $4.5 million, the three broadcast licenses at $9.0 million and relationships with regular advertisers at $1.5 million. Identifiable net assets totaled $15 million, so goodwill is $3 million. Goodwill represents the value of the assembled workforce, the stations' audience and the expected cost savings, which cannot be separated and sold on their own.
Finite-Lived and Indefinite-Lived Intangibles
Advertiser relationships have a limited life. Based on the history of the stations' client base, about 90% of advertisers remain after a year and the value fades over about seven years. The company amortizes them straight-line, $1.5 million over seven years, about $214,300 a year.
Broadcast licenses are issued for fixed terms but have been renewed routinely at little cost, and the company intends to renew them. Because no limit on their useful life can be foreseen, they are treated as indefinite-lived and are not amortized. Goodwill is also not amortized. Both are tested for impairment at least annually, and sooner if an event such as a loss of a major advertiser or a sharp drop in market ratings suggests their value may have fallen. Private companies may elect to amortize goodwill over ten years under an accounting alternative, but the broadcaster is owned by public shareholders and cannot.
Revising Depreciation on Studio Equipment
The company depreciated studio consoles and servers that it already owned, with an original cost of $1.2 million, over ten years on a straight-line basis with no salvage value. After four years, their book value was $720,000. When the stations were combined, engineers concluded that the equipment would be replaced within three more years because of a planned move to digital audio routing, and that it would sell for about $60,000 at that point.
This is a change in estimate, handled prospectively. Prior years are not restated. The remaining book value less the new salvage value, $660,000, is spread over three years, giving depreciation of $220,000 a year instead of $120,000. The change is disclosed in the notes because it affects income materially.
Testing a Tower Site for Impairment
The news and talk station's former transmitter site, a tower and small building on leased land, became partly redundant after the company combined transmitters. Its carrying amount is $850,000. An impairment test for assets held and used has two steps. First, the company compares the carrying amount with the undiscounted cash flows expected from the asset, mainly rent from two cellular carriers leasing space on the tower. Those flows total $700,000 over the remaining lease term, less than the carrying amount, so the asset is not recoverable.
Second, the loss equals how far the carrying amount sits above fair value. An appraiser valued the site at $520,000. The impairment loss is $330,000, recorded as a loss in operating income with a credit to the asset's carrying amount. The reduced amount becomes the new cost basis, and US standards do not allow the loss to be reversed later.
Testing Licenses and Goodwill
Two years after the purchase, advertising revenue in the market fell as local businesses moved spending to digital platforms. The company's annual test found that the fair value of the three licenses, estimated from the cash flows a new station could generate using them, had fallen to $8.2 million, below their $9.0 million carrying amount. An impairment loss of $800,000 was recorded.
Goodwill is tested at the reporting unit level. The radio group is one reporting unit, with a carrying amount, after the other impairments, of $16.1 million, including $3 million of goodwill. Its fair value, estimated with discounted cash flows and compared with recent station sales, was $15.4 million. Under the simplified test, the goodwill impairment is the $700,000 by which the unit's book amount tops its fair value, which is less than the goodwill balance, so the full $700,000 is recognized (Financial Accounting Standards Board, 2017). Before this change in the standards, companies had to estimate the implied fair value of goodwill by valuing every asset again, a costly second step that the simplified test removed.
Judgment in Impairment
Every figure in the impairment tests depends on forecasts: future cash flows, discount rates and comparable sales. Beatty and Weber (2006) found that companies' decisions about recording goodwill impairments were related to debt contracts, bonus plans and exchange listing rules, evidence that managers use the discretion these estimates allow. The same forecasts that support the purchase price are also the ones management would like to keep optimistic, since a lower forecast means a loss. For that reason, the company documents its assumptions, compares its forecasts with actual results each year and has the audit committee review the valuation models. Weygandt et al. (2021) note that disclosure of the methods and key assumptions allows readers to judge the reliability of these amounts.
Conclusion
After the acquisition, the broadcaster's assets followed different paths. Advertiser relationships are amortized over seven years, licenses and goodwill are tested annually, studio equipment was depreciated faster once its life was shortened, and a tower site and the licenses were written down when their value fell. The accounting captured a decline in the value of radio advertising that the purchase price had not anticipated.
References
Beatty, A., & Weber, J. (2006). Accounting discretion in fair value estimates: An examination of SFAS 142 goodwill impairments. Journal of Accounting Research, 44(2), 257-288. https://doi.org/10.1111/j.1475-679X.2006.00200.x
Financial Accounting Standards Board. (2017). Intangibles, goodwill and other (Topic 350): Simplifying the test for goodwill impairment (Accounting Standards Update No. 2017-04).
Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2021). Accounting principles (14th ed.). Wiley.
What the ACC 422 Week 2 instructions ask
In ACC 422 Week 2, students are typically asked to apply depreciation methods, account for changes in estimates, test long-lived assets for impairment and account for intangible assets and goodwill. Prompts may include straight-line, declining-balance and activity methods, revisions of useful life or salvage value, the recoverability test and impairment loss for assets held and used, and the difference between finite-lived intangibles that are amortized and indefinite-lived intangibles and goodwill that are tested for impairment. Some versions include research and development costs, disposals or a short note on how the same assets would be treated under IFRS. Students present calculations and entries and explain the reasoning, citing the textbook and the relevant standards in APA style.
How this ACC 422 Week 2 example is built
A radio broadcaster suits the week because most of what it owns is intangible: licenses from the Federal Communications Commission, relationships with advertisers and the goodwill of an established audience, alongside towers and studio equipment. The paper begins with the purchase price allocation, which sets up every later calculation. Each asset then gets its own section: amortization for relationships, no amortization for licenses and goodwill, a prospective change in depreciation for equipment, a two-step test for a tower site and annual tests for licenses and goodwill. Each section states the rule, shows the figures and records the entry. A closing discussion considers how much judgment lies behind impairment figures and how the company keeps that judgment in check.
ACC 422 Week 2 grading rubric: where the points go
Faculty generally grade this week on correct classification of assets as depreciable, amortizable or tested only for impairment, correct calculations and correct treatment of estimate changes. A change in useful life or salvage value must be applied prospectively, not by restating prior years. Impairment of assets held and used requires a recoverability test with undiscounted cash flows before measuring the loss at fair value. Goodwill impairment under current standards compares a reporting unit's fair value with its carrying amount. Entries must balance and agree with the text, and the allocation must total the price paid. Discussion of judgment and evidence adds credit, and clear headings with correct APA references make up the final marks.
ACC 422 Week 2 help: mistakes to avoid
Many ACC 422 Week 2 papers amortize every intangible, including broadcast licenses and goodwill. Check the life first: indefinite-lived intangibles and goodwill are tested for impairment, not amortized. Another frequent mistake is recalculating depreciation from the original cost after a change in estimate. Start from current book value and spread it over the remaining life. Students also skip the recoverability step and go straight to fair value, or compare fair value with undiscounted cash flows. Keep the two steps separate. For goodwill, cap the loss at the goodwill balance, and test at the reporting unit level, not asset by asset. Record every impairment as a loss in operating income. Finally, discuss the estimates behind the numbers, since graders expect judgment.
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ACC 422 Week 2 questions, answered
What does ACC/422 Week 2 usually cover?
It usually covers depreciation methods, changes in estimates, impairment of long-lived assets and accounting for intangible assets and goodwill.
Where can I find a free ACC 422 Week 2 sample paper?
The radio broadcaster example on this page covers the price allocation, amortization, a revised depreciation estimate and three impairment tests, all annotated in the margin. Share your own case and your first draft will be written free.
Are broadcast licenses amortized?
Licenses that can be renewed indefinitely at little cost are usually treated as indefinite-lived intangibles, so they are not amortized but are tested for impairment at least annually.
How is a change in useful life handled?
It is a change in estimate, applied prospectively: the remaining book value, less any revised salvage value, is depreciated over the new remaining life.
How is goodwill impairment measured now?
Under current US standards, the loss is the amount by which a reporting unit's carrying amount exceeds its fair value, limited to the goodwill allocated to that unit.
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