Question

After several profitable years running her business, Ingrid decided to acquire the assets of a small competing business. On May 1 of year 1, Ingrid acquired the competing business for $402,000. Ingrid allocated $67,000 of the purchase price to goodwill. Ingrid’s business reports its taxable income on a calendar-year basis. (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.)

. In lieu of the original facts, assume that Ingrid purchased only a phone list with a useful life of 5 years for $18,500. How much amortization expense on the phone list can Ingrid deduct in year 1, year 2, and year 3?

Answer 1

Basd on the information provided in the question, we can use the following to calculate the depreciation expense on the phone list.

The cost of the phone list = $18,500

Useful Life = 5 years.

Amortization expense per month = $18,500/60 months = $308.33 per month

1.) Amortization expense for Year 1 = 308.33 * 8 months(May Year 1 - December Year 1) = $2,467

2.) Amortization expense for Year 2 = 308.33 * 12 months = $3,700

3.) Amortization expense for Year 3 = 308.33 * 12 months = $3,700