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 $312,000. Ingrid allocated $52,000 of the purchase price to goodwill. Ingrid’s business reports its taxable income on a calendar-year basis. a. How much amortization expense on the goodwill can Ingrid deduct in year 1, year 2, and year 3?
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 $312,000. Ingrid allocated $52,000 of the purchase price to goodwill. Ingrid’s business reports its taxable income on a calendar-year basis. a. How much amortization expense on the goodwill can Ingrid deduct in year 1, year 2, and year 3?
Chapter14: Choice Of Business Entity—operations And Distributions
Section: Chapter Questions
Problem 44P
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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 $312,000. Ingrid allocated $52,000 of the purchase price to
a. How much amortization expense on the goodwill can Ingrid deduct in year 1, year 2, and year 3?
Expert Solution
Step 1
The distribution of an intangible asset's cost over the useful life of the assets is known as amortization. The business entities calculate the amortization expense by using the straight line method.
Intangible assets includes:
- Broadcast licenses
- Copyrights
- Patents
- Trademarks
- Goodwill
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