Question

Stannum Records obtains two intangible assets in a business acquisition: legal rights to reproduce songs, valued at $5 million, and a trademark valued at $1 million. The trademark expires in 10 years and can be renewed at a minimal cost. Stannum estimates a 5-year useful life for the song rights. Because much of the songs' economic value is realized in their early years, Stannum uses double-declining balance amortization. Amortization expense in the first year after the acquisition is closest to: $2.1 million. $2.2 million. $2.0 million.

Answer 1

$2 million

Step-by-step explanation:

Calculation to determine what Amortization expense in the first year after the acquisition is closest to:

First year Amortization expense after acquisition = 2/5 × $5 million

First year Amortization expense after acquisition = $2 million

Therefore Amortization expense in the first year after the acquisition is closest to: $2 million