Question

In early January, Burger Mania acquired 100% of the common stock of the Crispy Taco restaurant chain. The purchase price allocation included the following items: $8 million, patent; $6 million, trademark considered to have an indefinite useful life; and $9 million, goodwill. Burger Mania's policy is to amortize intangible assets with finite useful lives using the straight-line method, no residual value, and a five-year service life. What is the total amount of amortization expense that would appear in Burger Mania's income statement for the first year ended December 31 related to these items

Answer 1

Answer:

$1,600,000

Explanation:

Given the following parameters:

Patent = $8,000,000

Trademark = $6,000,000

Goodwill= $9,000,000

Given that both the trademark and goodwill cannot be amortized as they were impaired or revealed.

Therefore, in this situation, only patents will be amortized over a five-year service life

Hence, the total amount of amortization expense that would appear in Burger Mania's income statement for the first year ended December 31 related to these items is = 8,000,000 divided by 5 = $1,600,000