Question

Assume that Nolola acquires a competitor's assets on March 31^st. The purchase price was $150,000. Of that amount, $125,000 is allocated to tangible assets and $25,000 is allocated to goodwill (a §197 intangible asset). What is Nolola's amortization deduction for the current year? (Round final answer to the nearest whole number.)

Multiple Choice

• $1,250.

• $1,319.

• $0.

• $1,389.

• None of the choices are correct.

Answer 1

As &197 intangible asset has recovery period of 180 months, and here full month convention applies, so amortisation is calculated below. So, for march month also considered for deduction and from march to Dec it is 10 months The asset is to amortised for 10 months out of 180 months in total Thus, resulting in deduction for current year is (25000*10 months/180 months) = $1,389 Ans is $ 1,389 I hope this solves your doubt. Feel free to comment if you still have any query or need something else. I'll help asap.