Question

During the past two years, through extensive advertising and improved customer relations, Brick Corporation estimated that it had developed customer goodwill worth $500,000. For the current year, the amount of goodwill Brick Corporation may amortize would be:

a. $100,000.
b. $33,333.
c. $26,667.
d. $16,667.
e. None of these choices are correct.

Answer 1

Goodwill is not amortized in general, but there are exceptions. If the useful life is determined to be 5 years, the annual amortization expense for Brick Corporation's goodwill of $500,000 would be $100,000.

Step-by-step explanation:

Goodwill is an intangible asset that represents the value of a company's reputation, customer relationships, and other non-physical assets. In general, goodwill is not amortized, but it is tested for impairment annually. However, there are exceptions to this general rule. According to the question, Brick Corporation estimated that it had developed customer goodwill worth $500,000. The amount of goodwill that can be amortized depends on the useful life of the goodwill. If the useful life is determined to be 5 years, the annual amortization expense would be $100,000 ($500,000 / 5 years). Therefore, the correct answer is option a. $100,000.