Question

1. Hepburn Company bought a copyright for $90,000 on January 1, 2018, at which time the copyright had an estimated useful life of 15 years. On January 5, 2021, the company determined that the copyright would expire at the end of 2026. How much should Hepburn record as amortization expense for this copyright for 2021?
2. 1. $14,400.
   2. $7,200.
   3. $8,000.
   4. $12,000.

Answer 1

Cost of copyright = $90,000

date of purchase = January 1, 2018

Estimated useful life = 15 years

Annual amortization expense = Cost of equipment / Useful life

= 90,000/15

= $6,000

Accumulated amortization expense for 3 years = Annual amortization expense x 3

= 6,000 x 3

= $18,000

Book value of copyright at January 5, 2021 = Cost of copyright - Accumulated amortization expense for 3 years

= 90,000-18,000

= $72,000

On January 5, 2021, it was determined that copyright will expire at the end of 2026. Hence, remaining useful life of copyright is 6 years.

Accumulated amortization expense for remaining 6 years = Book value of copyright at January 5, 2021/ Remaining useful life

= 72,000/6

= $12,000

Correct option is D.

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