Question

Bricktown Exchange purchases a copyright for $50,000. The copyright has a remaining legal life of 25 years, but only an expected useful life of five years with no residual value. Assume the company uses the straight-line method to record amortization. What is the carrying value of the copyright at the end of the second year?

Answer 1

The carrying value of the copyright at the end of the second year, using the straight-line method of amortization, is $30,000, which is calculated by subtracting the accumulated amortization ($20,000) from the original cost ($50,000).

Step-by-step explanation:

The carrying value of the copyright at the end of the second year can be calculated by using the straight-line method of amortization. To determine the amortization expense per year, take the initial cost of the copyright ($50,000) and divide by the expected useful life (5 years). This gives an annual amortization expense of $10,000.

After two years, Bricktown Exchange would have recorded two years of amortization expenses. Therefore, the total amortization after two years is 2 years × $10,000/year = $20,000. Subtracting this total from the original cost gives us the carrying value.

Carrying value at end of second year = Original cost – Total accumulated amortization
= $50,000 – $20,000
= $30,000.

Answer 2

$30,000

Step-by-step explanation:

Amortization is the process of expensing the cost of an intangible over its useful life. It is equivalent to depreciation in physical assets.

Under the straight-line depreciation, the depreciation amount is constant throughout the life of the asset.

For Bricktown, the cost of the asset is $50,000

use-life is five years,

the rate of depreciation will be 1/5 x 100

=1/5 x 100

20 percent

depreciation per year will 20% x $50,000

=20/100 x 100

=10,000

Accumulated depreciation at the end of the second year

=$10,000 x 2

=$20,000

The carrying value after two years will be the value of the asset - accumulated value. ( carrying value is the book value).

=$50,000 - $20,000

=$30,000