Question

Rich Corporation purchased a limited-life intangible asset for $270,000 on Sept 1, 2010. It has a useful life of 10 years. What total amount of amortization expense should have been recorded on the intangible asset by December 31, 2012?

A) $ -0-.
B) $81,000
C) $54,000
D) $63,000

Answer 1

By December 31, 2012, Rich Corporation should have recorded a total amortization expense of $63,000 for the intangible asset purchased for $270,000 with a 10-year useful life.

Step-by-step explanation:

The question requires calculating the amortization expense for a limited-life intangible asset over a specific period.

Rich Corporation purchased the asset for $270,000 on September 1, 2010, with a useful life of 10 years. To calculate the amortization expense incurred by December 31, 2012, we determine the amount of time that has passed since the purchase date up to the end of 2012, which is 2 years and 4 months (or 28 months).

The annual amortization expense is the cost of the asset divided by its useful life, which is $270,000 / 10 years = $27,000 per year. For 28 months, the pro-rated amortization expense is ($27,000 / 12 months) * 28 months = $63,000.

Therefore, the total amount of amortization expense recorded by December 31, 2012 is $63,000 (Answer D).