Focal Point Engineering purchased a trademark at the beginning of 2013 for $200,000. Although the trademark's legal life is 20 years, economic benefits were expected for only 10 years. Also, during 2013, the company incurred research and development costs of $200,000. The book value of the trademarks at December 31, 2013, is

Question

Quizplus · Accepted Answer

The book value of a trademark is calculated as its cost minus any accumulated amortization. Since the legal life of the trademark is 20 years but the economic life is only 10 years, we can assume that the trademark is being amortized over 10 years. Therefore, the annual amortization expense would be $200,000 / 10 = $20,000.

To calculate the book value at the end of 2013, we need to subtract the accumulated amortization for the year. Since it is the first year of the trademark's use, the accumulated amortization for the year would be $20,000.

Book value = $200,000 - $20,000 = $180,000

Therefore, the correct answer is B.

Focal Point Engineering Purchased a Trademark at the Beginning of 2013