Question 1

Glacier Corp. purchased a trademark for $480,000 on January 1, Year 1. The trademark has a legal life of 10 years and an estimated useful life of 8 years. On January 1, Year 4, Glacier determines that the trademark's total useful life should be 6 years instead of 8 years.

What amortization expense should Glacier record for the trademark in Year 4?

Accepted Answer

For changes in useful life estimates, apply prospectively. Calculate current book value (cost minus accumulated amortization), determine remaining useful life under new estimate, divide book value by remaining life.

Question 2

What mistakes do candidates make on this CPA question?

Accepted Answer

Using original cost instead of current book value, not adjusting for years already elapsed, or applying the change retrospectively

How to approach this question

Full Answer

Common mistakes

Practice the full CPA FAR Practice Exam 2

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