Hepburn Company bought a copyright for $90,000 on January 1, 2010, at which time the copyright had an estimated useful life of 15 years. On January 5, 2013, the company determined that the copyright would expire at the end of 2018. How much should Hepburn record as amortization expense for this copyright for 2013?
A)$14,400.
B)$7,200.
C)$8,000.
D)$12,000.

Question

Quizplus · Accepted Answer

First, we need to calculate the remaining useful life of the copyright as of January 5, 2013:

Original useful life = 15 years
Elapsed time = 3 years (from 2010 to 2013)
Remaining useful life = 15 - 3 = 12 years

Then, we need to calculate the annual amortization expense:

Annual amortization expense = Cost of copyright / Useful life
= $90,000 / 15 = $6,000 per year

Finally, we can calculate the amortization expense for 2013 by multiplying the annual amortization expense by the fraction of the year that the copyright was still useful:

Amortization expense for 2013 = $6,000 × (12/12) = $6,000

Therefore, the correct answer is D) $12,000, because the company had already recorded three years of amortization expense before 2013, and in 2013 it should record another $6,000 for the remaining useful life of the copyright.

Hepburn Company Bought a Copyright for $90,000 on January 1