Kow-Pow Company purchased a limited-life intangible asset for $150,000 on May 1,2015.It has a useful life of 10 years.What total amount of amortization expense should have been recorded on the intangible asset by December 31,2017?
A)$0
B)$30,000
C)$40,000
D)$45,000

Question

Quizplus · Accepted Answer

The formula for calculating the annual amortization expense is the cost of the asset divided by its useful life. 
Annual amortization expense = $150,000 / 10 years = $15,000
To determine the total amortization expense recorded by December 31, 2017 (which is the end of the third year since the purchase), we multiply the annual expense by the number of years passed: 
Total amortization expense = $15,000 x 3 years = $45,000. 
Therefore, the correct answer is Choice C ($40,000).

Kow-Pow Company Purchased a Limited-Life Intangible Asset for $150,000 on May