ExpertMedium1 markMultiple Choice
CPA · Question 35 · Area II: Balance Sheet Accounts
A company purchases a trademark for $50,000. It expects to renew the trademark indefinitely for a nominal fee. How should this asset be amortized?
A company purchases a trademark for $50,000. It expects to renew the trademark indefinitely for a nominal fee. How should this asset be amortized?
Answer options:
A.
Over 10 years.
B.
Over 40 years.
C.
Over its legal life.
D.
It should not be amortized.
How to approach this question
Indefinite life intangibles (Goodwill, Trademarks with indefinite renewal) -> No Amortization. Test for impairment annually.
Full Answer
D.It should not be amortized.✓ Correct
D
Intangible assets with indefinite useful lives are not amortized but are tested for impairment at least annually.
Common mistakes
Amortizing over legal life even when renewal is indefinite.
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