In early January 2016, Novak Corporation applied for a trade name, incurring leg
ID: 2508579 • Letter: I
Question
In early January 2016, Novak Corporation applied for a trade name, incurring legal costs of $16,400. In January 2017, Novak incurred $8,200 of legal fees in a successful defense of its trade name.
Compute 2016 amortization, 12/31/16 book value, 2017 amortization, and 12/31/17 book value if the company amortizes the trade name over 10 years. (Round all answers to 0 decimal places, e.g. 8,564)
2016 amortization
$
12/31/16 book value
$
2017 amortization
$
12/31/17 book value
$
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Compute the 2017 amortization and the 12/31/17 book value, assuming that at the beginning of 2017, Novak determines that the trade name will provide no future benefits beyond December 31, 2020.
2017 amortization
$
12/31/17 book value
$
LINK TO TEXT
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Ignoring the response for part (b), compute the 2018 amortization and the 12/31/18 book value, assuming that at the beginning of 2018, based on new market research, Novak determines that the fair value of the trade name is $15,200. Estimated total future cash flows from the trade name is $16,200 on January 3, 2018.
2018 amortization
$
12/31/18 book value
$
Explanation / Answer
SOLUTION
A.
2016 Amortization- $16,400 / 10 = $1,640
2016 Book value - $16,400 - $1,640 = $14,760
2017 Amortization- ($14,760 + $8,200) / 9 = $2,551
2017 Book value - ($14,760 + $8,200 - $2,551) = $20,409
B.
2017 Amortization- ($14,760 + $8,200) / 4 = $5,740
2017 Book value - ($14,760 + $8,200 - $5,740) = $17,220
C.
2018 Amortization (after recording impairment loss) = $15,200 / 8 = $1,900
2018 book value = $15,200 - $1,900 = $13,300