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Hepburn Company bought a copyright for $150,000 on January 1, 2015, at which time the copyright had an estimated useful life of 20 years. On January 5, 2018, the company determined that the copyright would expire at the end of 2021. How much should Hepburn record as amortization expense for this copyright for 2018?

Respuesta :

Answer:

Amortization expense for the year 2018: 31,875

Explanation:

The copyright will need to adjust the amortization base on the new information.

150,000 / 20 = 7,500 amortization per year

Depreciation from 2015 to 2017 : 3 x 7,500 = 22,500

book value at Jan 1st, 2018 = 150,000 - 22,500 = 127,500

From there we are given new information about the economic life.

We did not have knowledge before, so we don't adjust prior periods.

We recalculate the amortization:

economif life from Jan 2018 to Dec 2021 = 4 years

127,500 / 4 years = 31,875 per year

Amortization expense for the year 2018: 31,875