After several profitable years running her business, Ingrid decided to acquire the assets of a small competing business. On May 1 of year 1, Ingrid acquired the competing business for $336,000. Ingrid allocated $56,000 of the purchase price to goodwill. Ingrid’s business reports its taxable income on a calendar-year basis.
a. How much amortization expense on the goodwill can Ingrid deduct in year 1, year 2, and year 3?
b. In lieu of the original facts, assume that Ingrid purchased only a phone list with a useful life of 5 years for $13,000. How much amortization expense on the phone list can Ingrid deduct in year 1, year 2, and year 3?
A) ingrid could deduct $2,489 amortization expense on the goodwill in year 1 and $3733 of amortization expense on the goodwill in years 2 and 3, computed as follow:
Description |
amount |
explanation |
1)basis of goodwill |
$56000 |
given |
2)recovery period |
180 |
15 years |
3)monthly amortization |
311.11 |
1/2 |
4)month in year 1 |
8 |
May through December |
5)year 1 straight line amortization |
2488.88 |
3 × 4 |
6)month in year 2 and 3 |
12 |
January through December |
7)year 2 and 3 straight line amortization |
3733.32 |
3 ×6 |
B) ingrid's amortization for the phone list for year 1 is $1733, years 2 and 3 is $2600, computed as follow:
Description |
phone list |
1)basis of phone list |
13000 |
2)recovery period in months |
60(5 × 12) |
3)monthly amortization |
216.67 |
4)month in year 1 |
8 |
5)year 1 straight line amortization |
1733.36 |
6)months in year 2 and 3 |
12 |
7)yeat 2 and 3 straight line amortization |
2600.04 |
After several profitable years running her business, Ingrid decided to acquire the assets of a small...
After several profitable years running her business, BLANK decided to acquire the assets of a small competing business. On May 1 of year 1, BLANK acquired the competing business for $372,000. BLANK allocated $62,000 of the purchase price to goodwill. BLANK’s business reports its taxable income on a calendar-year basis. (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.) a. How much amortization expense on the goodwill can BLANK deduct in year 1, year 2,...
After several profitable years running her business, BLANK decided to acquire the assets of a small competing business. On May 1 of year 1, BLANK acquired the competing business for $372,000. BLANK allocated $62,000 of the purchase price to goodwill. BLANK’s business reports its taxable income on a calendar-year basis. (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.) a. How much amortization expense on the goodwill can BLANK deduct in year 1, year 2,...
After several profitable years running her business, BLANK decided to acquire the assets of a small competing business. On May 1 of year 1, BLANK acquired the competing business for $372,000. BLANK allocated $62,000 of the purchase price to goodwill. BLANK’s business reports its taxable income on a calendar-year basis. (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.) **A is correct, but I cannot figure out B** a. How much amortization expense on the...
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