On June 1,2013,Red Corporation purchased an existing business.With respect to the acquired assets of the business,Red allocated $300,000 of the purchase price to a patent.The patent will expire in 20 years.Determine the total amount that Red may amortize for 2013 for the patent.

Question

Quizplus · Accepted Answer

The patent is amortized over its useful life. Since it was purchased on June 1, 2013, there are 7 months remaining in the year. The annual amortization is $300,000 / 20 years = $15,000 per year. For 7 months, the amortization is ($15,000 / 12) * 7 = $8,750. However, the correct calculation should be for the full year, which is $15,000, but since the question asks for 2013, the prorated amount for 7 months is $8,750. The closest option to this calculation is $11,667, which seems to be a mistake in the options provided.

On June 1,2013,Red Corporation Purchased an Existing Business