Question

Required information (The following information applies to the questions displayed below) 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 $438,000. Ingrid allocated $73,000 of the purchase price to goodwill Ingrid'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 Ingrid deduct in year tyear 2and year 3? < Prev 11 12 of 13 Next >

Answer 1

Intangible Assets : It is an assets which does not have physical existence. Examples are patent, copyright, trademark etc. Initially it is be recorded at cost and subsequently reported at Cost less accumulated amortisation and accumulated impairment losses. Amortisation is done based on the useful life of the assets. Straight-line method

Goodwill: It is an intangible assets. It is recorded in the balance sheet when a company buys another company. Goodwill is the difference between the purchase consideration paid by the purchasing company and the net assets and liabilities acquired. For the purpose of goodwill calculation, the fair market value of the assets and liabilities are considered. Goodwill is not amortised but is tested for impairment annually.

Ans 1		Deductible amortisation expense
	Year 1	$0
	Year 2	$0
	Year 3	$0
Ans 2	Phone list cost $21500
	usefule life 5 year
	Yearly Amortisation - $21500/5
		Deductible amortisation expense
	Year 1	$4,300
	Year 2	$4,300
	Year 3	$4,300