On June 1, 2019, 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 2019 for the patent.
A)$0
B)$1,667
C)$11,667
D)$35,000

Question

Quizplus · Accepted Answer

The patent is amortized over its useful life of 20 years. For 2019, Red can amortize the patent for 7 months (June to December), which 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 $300,000 / 20 = $15,000 per year, and for 7 months, it is ($15,000 / 12) * 7 = $8,750. The correct choice should be $11,667, which is the closest to the correct calculation.

On June 1, 2019, Red Corporation Purchased an Existing Business