Question

Round Wheels, Inc. purchased a patent for $730,000, and a trademark for $320,000. Round Wheels, Inc. amortizes intangible assets with finite useful lives using the straight-line method, no residual value, and a five-year service life. What is the total amount of amortization expense that would appear in Round Wheels, Inc. income statement for the first year related to these items

Answer 1

Answer:

$210,000.00  

Explanation:

In the first year,the amortization expense that would appear in Round Wheels ,Inc income statement is the sum of both intangible assets amortization expense where amortization for each intangible asset is computed using the below formula:

amortization expense=(cost of intangible asset-salvage value)/service life:

Patent amortization expense=($730,000-$0)/5=$ 146,000.00  

Trademark amortization expense=($320,000-$0)/5=$64,000.00  

Total amortization expense=$146,000+$64,000.00=$210,000.00