Drip Co.bought a trademark from Gregg Corp.on January 1, 2010, for $163,000.An independent consultant retained by Drip estimated that the remaining useful life is 50 years.Its unamortized cost on Gregg's accounting records was $61,000.Drip decided to write off the trademark over the maximum period allowed.How much should be amortized for the year ended December 31, 2010?
A)$1,220.
B)$3,260.
C)$2,333.
D)$2,700.

Question

Quizplus · Accepted Answer

The maximum period allowed for the trademark amortization is 50 years. Therefore, the yearly amortization expense would be $163,000/50 = $3,260. Since the trademark was purchased on January 1, 2010, Drip Co. will amortize it for the remaining period of the year 2010, which is 12/12 = 1 year. Hence, the amount that should be amortized for the year ended December 31, 2010, would be $3,260 x 1 = $3,260. Therefore, the correct answer is option B.

Drip CoBought a Trademark from Gregg Corp