On July 1, 2011, Jenks Company purchased the copyright to Jackson Computer tutorials for $135,000.It is estimated that the copyright will have a useful life of 5 years with an estimated residual value of $10,000.The amount of Amortization Expense recognized for the year 2011 would be

Question

Quizplus · Accepted Answer

To find the annual amortization expense, we need to use the formula: (Cost of asset - Residual value) / Useful life. 
The cost of the copyright is $135,000, the residual value is $10,000 and the useful life is 5 years. 
Therefore, the calculation would be: ($135,000 - $10,000) / 5 = $25,000 of annual amortization expense. However, because the company only owned the copyright for a portion of the year (July 1 - December 31), we need to prorate this amount. 
So, the amortization expense for 2011 would be: ($25,000 / 5) * 6/12 = $12,500.

On July 1, 2011, Jenks Company Purchased the Copyright to Jackson