Question

Assume that Bethany acquires a competitor's assets on March 31st. The purchase price was $150,000. Of that amount, $125,000 is allocated to tangible assets and $25,000 is allocated to goodwill (a §197 intangible asset). What is Bethany's amortization deduction for the current year? (Round final answer to the nearest whole number.)

Answer 1

$1,389

Step-by-step explanation:

Tangible assets are depreciated, not amortized. Only the $25,000 goodwill will be amortized.

A §197 intangible asset can be amortized over a 15 year period that starts on the month that the intangible asset was acquired. In this case, the amortization expense will include March, so we need to calculate amortization for 10/12 of a year.

The amortization per year = $25,000 / 15 years = $1,667

amortization for year one = amortization per year x number of months = $1,667 x 10/12 = $1,389