The Nandina Corporation was formed and began operations on July 1 of the current year and incurred the following expenses during the year: $\begin{array}{lr}
\text { State fees for incorporation } & \$ 800 \
\text { Legal and accounting fees incident to organization } & 1,700 \
\text { Legal fees for the issuance of stock } & 600 \
\text { Temporary directors' fees } & 1,100
\end{array}$ If the corporation chooses not to expense but rather amortizes organizational costs over 180 months, what is the amount of its amortization expense for the current year?

Question

Quizplus · Accepted Answer

The total organizational costs that can be amortized are the state fees for incorporation ($800), legal and accounting fees incident to organization ($1,700), and temporary directors' fees ($1,100), totaling $3,600. Legal fees for the issuance of stock are not considered organizational costs and cannot be amortized as such. Amortizing $3,600 over 180 months gives $20 per month. Since the corporation started operations on July 1, it would amortize these costs for 6 months in the current year, resulting in an amortization expense of $120 ($20 * 6 months) for the current year.

The Nandina Corporation Was Formed and Began Operations on July