Question

On January 2, 2020, Fran acquires a business from Chuck. Among the assets purchased are the following intangibles: patent with a 7-year remaining life, a covenant not to compete for 10 years, and goodwill. Of the purchase price, $140,000 was paid for the patent and $60,000 for the covenant. The amount of the excess of the purchase price over the identifiable assets was $100,000. What is the amount of the amortization de

Answer 1

Total amortization deduction is $20,000

Step-by-step explanation:

The computation of the amortization deduction is shown below:

Patent $140,000 15 $9,333

Covenant $60,000 15 $4,000

Goodwill $100,000 15 $6,667

Total amortization deduction is $20,000

We simply divded the purchase price of each asset with the life i.e. 15 years