On January 1, 2020, Muhlenberg Corp. bought a trademark from Glasgow Corp. for $ 160,000. An independent consultant retained by Muhlenberg estimated that the remaining useful life is 50 years. The trademark's carrying value on Glasgow's books was $ 61,000. Muhlenberg decided to write off the trademark over the maximum period allowed. How much should be amortized for the year ended December 31, 2020?
A) $ 1,220
B) $ 3,200
C) $ 4,000
D) $ 8,000

Question

Quizplus · Accepted Answer

Under U.S. GAAP, intangible assets with finite lives, such as trademarks, are amortized over their useful life. However, the maximum period allowed for amortization of such intangible assets is generally 40 years. Since Muhlenberg Corp. decided to write off the trademark over the maximum period allowed, the annual amortization expense is calculated as the purchase price ($160,000) divided by the maximum period (40 years), which equals $4,000 per year. However, the question specifically asks for the amount to be amortized for the year ended December 31, 2020, which would still be $4,000, indicating a mistake in my explanation regarding the choice selection. The correct annual amortization expense is indeed $4,000, aligning with choice C, not B.