Question

On January 1, 2013 Vick Company purchased a trademark for $400,000, which had an estimated useful life of 16 years. In January 2017, Vick paid $60,000 for legal fees in a successful defense of the trademark.
Required:

How much should Vick record as trademark amortization expense for 2017?

Answer 1

Answer:

$30,000

Explanation:

Usually, patents do not have a salvage value. If the useful life is 16 years, the amortization rate will be 1/16 x 100

=0.0625 x 100

=6.25%

Before January 2017, the trademark had been amortized for four years ( 2013, 2014, 2015, and 2016.)

Amortization per year = 6.25% x  $400,000

=0.0625 x $400,000

=$25,000 per year: Four year amortization would be

=$25,000 x 4

=$100,000

The Book value as of January 2017 will be

=$400,000 -$100,000

=$300,000

add legal fee

=$300,000 + $60,000

=$360,000

remaining useful life = 16 -4 years = 12 years.

new depreciation rate = 1/12 x 100

=0.08333

Depreciation amount for 2017

= 0.08333 x  $360,000

=$30,000