Question

Bricktown Exchange purchases a copyright on January 1, 2012, for $50,000. The copyright has a remaining legal life of 25 years, but only an expected useful life of five years with no residual value. Assuming the company uses the straight-line method, what is the amortization expense for the year ended December 31, 2012?

Answer 1

Answer: $10,000

Explanation: Amortization expense is writing off of the intangible asset over its estimated useful life. It reflects the part of that intangible asset that is consumed over that period of time.

While computing amortization useful life should be taken into consideration and not its legal life. It can be computed as follows under straight line method :-

`=\:(book\:value\:-residual\:value)/(useful\:life)`

`=\:(50,000\:-0)/(5)`

= $10,000