On June 1,2015,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 2015 for the patent.
A)$0
B)$1,667
C)$11,667
D)$35,000
E)None of the above

Question

Quizplus · Accepted Answer

The patent is amortized over its useful life of 20 years. The annual amortization is $300,000 / 20 = $15,000. For 2015, since the purchase was made on June 1, only 7 months of amortization can be claimed: $15,000 * (7/12) = $8,750. However, the closest option to this calculation is $11,667, which suggests a possible error in the options provided.

On June 1,2015,Red Corporation Purchased an Existing Business