In early January 2011, Reymont Corporation applied for a trade name, incurring legal costs of $18,000. In January 2012, Reymont incurred $7,800 of legal fees in a successful defense of its trade name.
Instructions
(a) Compute 2011 amortization, 12/31/11 book value, 2012 amortization, and 12/31/12 book value if the company amortizes the trade name over 10 years.
(b) Compute the 2012 amortization and the 12/31/12 book value, assuming that at the beginning of 2012, Reymont determines that the trade name will provide no future benefits beyond December 31, 2015.
(c) Ignoring the response for part (b), compute the 2013 amortization and the 12/31/13 book value, assuming that at the beginning of 2013, based on new market research, Reymont determines that the fair value of the trade name is $16,000. Estimated total future cash flows from the trade name is $17,000 on January 3, 2013.