In early January, Burger Mania acquired 100% of the common stock of the Crispy T
ID: 2466961 • Letter: I
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: $4 million, patent; $5 million, trademark considered to have an indefinite useful life; and $6 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?
Explanation / Answer
As per policy of Burger Mania, depreciation will be charged on Patent & Goodwill only, not on Trademark as it has indefinite useful life.
Depreciation on Patent = $4million/5 = $0.80million
Depreciation on Goodwill = $6million/5 = $1.20million
So, total depreciation = $2.00 million