The Nandina Corporation was formed and began operations on July 1, 2018, and incurred the following expenses during the year: $\begin{array}{llcc}
\text { State fees for incorporation } &\$800 \
\text { Legal and accounting fees incident to organization} &1,700\
\text {Legal fees for the issuance of stock } &600\
\text { Temporaty directors' fees } &1,100\
\end{array}$
If the corporation chooses not to expense but rather amortizes organizational costs over 180 months, what is the amount of its amortization expense for 2018?

Question

The Nandina Corporation was formed and began operations on July 1, 2018, and incurred the following expenses during the year: $\begin{array}{llcc}
  \text { State fees for incorporation } &\$800  \
 \text {  Legal and accounting fees incident to organization} &1,700\
 \text {Legal fees for the issuance of stock  } &600\
 \text { Temporaty directors' fees } &1,100\
\end{array}$
 If the corporation chooses not to expense but rather amortizes organizational costs over 180 months, what is the amount of its amortization expense for 2018?

Quizplus · Accepted Answer

The total organizational costs are $800 + $1,700 + $1,100 = $3,600. Legal fees for the issuance of stock are not included. Amortizing $3,600 over 180 months gives $20 per month. For 6 months (July to December 2018), the amortization expense is $20 x 6 = $120.

The Nandina Corporation Was Formed and Began Operations on July