Question

Chesapeake Inc. acquired a registered trademark for $600,000. The trademark has a remaining legal life of 5 years but can be renewed every 10 years for a nominal fee. Chesapeake does not expect to renew the acquired trademark when the legal life is over. What amount of amortization expense should Chesapeake record for the trademark in the current year?

a. $0
b. $15,000
c. $40,000
d. $120,000

Answer 1

d. $120,000

Step-by-step explanation:

Amortization expense = Cost ÷ Estimated useful life

therefore

Amortization expense = $600,000 ÷ 5 = $120,000

Note ; In this case the legal life is the same as the useful life.