Question

1.On May 1, 2017, Irwin Company purchased the copyright to Quick Computer Tutorials for $120000. It is estimated that the copyright will have a useful life of 5 years. The amount of amortization expense recognized for the year 2017 would be

$24000.

$12000.

$16000.

$12800.

2.

Whyte Clinic purchases land for $420000 cash. The clinic assumes $4500 in property taxes due on the land. The title and attorney fees totaled $3000. The clinic had the land graded for $6600. What amount does Whyte Clinic record as the cost for the land?

$426600.

$434100.

$420000.

$427500.

Answer 1

1.
Amortization expense is calculated using straight line method
Annual Amortization expense	Value of copyright/Estimated useful life
Annual Amortization expense	$120000/5
Annual Amortization expense	$24,000
Amortization expense for 2017	24000*(8/12)
Amortization expense for 2017	$16,000
Thus, amount of amortization expense recognized for 2017 would be $16,000
(Copyright is purchase on May 2017 and thus proportionate amortization expense is charged for 8 months that is from May 2017 to December 2017)
2.
Cost of land recorded in the books would be all the costs incurred in purchasing the land
Calculation of cost of land is shown below
Purchase cost	$420,000
Property taxes	$4,500
Title and attorney fees	$3,000
Land grading	$6,600
Cost of land	$434,100
Thus, cost for the land reported would be $434,100.