After several profitable years running her business, Ingrid decided to acquire t
ID: 2806003 • Letter: A
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 $438,000. Ingrid allocated $73,000 of the purchase price to goodwill. Ingrid’s business reports its taxable income on a calendar-year basis.
In lieu of the original facts, assume that Ingrid purchased only a phone list with a useful life of 5 years for $21,500. How much amortization expense on the phone list can Ingrid deduct in year 1, year 2, and year 3?
Phone List
Year 1 Amoritization expense =/= 2867 (this was the answer I got and was marked incorrect)
Year 2 Amoritization expense =/= 4300 (this was the answer I got and was marked incorrect)
Year 3 Amoritization expense =/= 4300 (this was the answer I got and was marked incorrect)
Explanation / Answer
Amortisation for Full Year
7167
(21500*5/15)
First Year
4778
(7167/12*8) for 8 month
Remaining Basis
16722
(21500-4778)
Second Year
5574
(16722*5/15)
Remaining Basis
11148
(16722-5574)
Third Year
3716
Since Section 197 of Internal Revenue Code provides amortisation period of 180 month or 15 months irrespective of life.
Thanks...
Amortisation for Full Year
7167
(21500*5/15)
First Year
4778
(7167/12*8) for 8 month
Remaining Basis
16722
(21500-4778)
Second Year
5574
(16722*5/15)
Remaining Basis
11148
(16722-5574)
Third Year
3716
Since Section 197 of Internal Revenue Code provides amortisation period of 180 month or 15 months irrespective of life.