Question

Which convention applies to the amortization of purchased intangibles?

a. Half-Year Convention
b. Mid-Quarter Convention
c. Mid-Month Convention
d. No specific convention applies to intangibles amortization

Answer 1

The convention that applies to the amortization of purchased intangibles is the Half-Year Convention.The correct option is A.

Step-by-step explanation:

The convention that applies to the amortization of purchased intangibles is the Half-Year Convention. This convention assumes that the purchased intangible asset is being used evenly over its useful life. Under this convention, the first year of amortization is calculated as if the asset was acquired halfway through the year.

For example, if an intangible asset has a useful life of 6 years and was purchased on July 1, the first year of amortization would only cover the period from July 1 to December 31.

Other conventions, such as the Mid-Quarter and Mid-Month conventions, are used for the depreciation of tangible assets.

Answer 2

The convention that applies to the amortization of purchased intangibles is the Mid-Month Convention. Option C is answer.

Step-by-step explanation:

The Mid-Month Convention is a method used for the amortization of purchased intangibles, allocating the expense over the asset's useful life. This convention assumes that the asset is placed in service or disposed of at the midpoint of the month, regardless of the actual acquisition date. It is a practical approach for accounting purposes to evenly distribute amortization expenses.

Options (a) Half-Year Convention and (b) Mid-Quarter Convention are conventions applied to tangible property, not specifically to intangibles. Option (d) No specific convention applies to intangibles amortization is incorrect because there is a specific convention, which is the Mid-Month Convention, commonly used in accounting practices for intangible assets.

Option C (Mid-Month Convention) is the answer.