Jeff Corporation purchased a limited-life intangible asset for $225,000 on May 1, 2013. It has a useful life of 10 years. What total amount of amortization expense should have been recorded on the intangible asset by December 31, 2015?
A) $ -0-
B) $45,000
C) $60,000
D) $67,500

Question

Quizplus · Accepted Answer

To calculate the annual amortization expense for the intangible asset, we divide the cost by the useful life:

$225,000 ÷ 10 years = $22,500 per year

Since Jeff Corporation purchased the intangible asset on May 1, 2013, it would have been in use for 8 months in 2013 (May to December). Therefore, the amortization expense for 2013 would be:

($22,500 ÷ 12 months) x 8 months = $15,000

For the years 2014 and 2015, the full annual amortization expense of $22,500 would be recorded. Therefore, the total amount of amortization expense that should have been recorded on the intangible asset by December 31, 2015 is:

2013: $15,000
2014: $22,500
2015: $22,500
Total: $60,000 (choice C)

Jeff Corporation Purchased a Limited-Life Intangible Asset for $225,000 on May