Question

An intangible asset with an estimated useful life of 30 years was acquired on January 1, 2007, for $540,000. On January 1, 2017, a review was made of intangible assets and their expected service lives, and it was determined that this asset had an estimated useful life of 30 more years from the date of the review. What is the amount of amortization for this intangible in 2017

Answer 1

Answer:

Amortization for the year 2017 is $12,000

Explanation:

Given:

Estimated Useful life = 30 years

Cost of Assets on January 1, 2007 = $540,000

Now,

The Amortization per year = $\frac{\textup{Cost of asset}}{\textup{Useful life}}$

or

The Amortization per year = $\frac{\textup{540,000}}{\textup{30}}$

or

The Amortization per year = $18,000

Thus,

Accumulated amortization on January 1, 2017

= Amortization per year 18000 × Number of years from 2007 to 2017

= $18,000 × 10

= $180,000

Therefore,

The Book Value of Asset on January 1, 2017 = $540,000 - $180,000

= $360,000

also,

The Revised useful life = 30 years

Therefore,

The Amortization per year = $\frac{\textup{Current book value of asset}}{\textup{Useful life}}$

or

The Amortization per year = $\frac{\textup{360,000}}{\textup{30}}$

or

The Amortization per year = $12,000

Hence,

Amortization for the year 2017 is $12,000