Can someone please tell me how this textbook answer makes any sense?
Strong Co. purchased a trademark from Wall Co. for 60,000 on July 1, 2001. Expenditures of 10,000 for successful litigation in defence of the trademark were paid on July 1, 2001. Strong estimates that the useful life of the trademark will be 20 years from the date of acquisition. Calculate the carrying value of the trademark at December 31, 2002.
Ans: Cost of the trademark $ 60,000 Amortization to July 1, 2002 (60,000 / 20 X 2 years) ( 6,000) Book value July 1, 2001 54,000 Cost of successful litigation 10,000 Carrying amount 64,000 Amortization for 6 months (64,000 / 18 X .5 years) ( 1,778) Book value December 31, 2002 $62,222 =====
Also, why are they ignoring 2004’s amortization in a similar question below?
Early in January, 2000, Vars Co. purchased a patent for a new consumer product for $ 540,001. At the time of the purchase, the patent was valid for fifteen years. Due to the competitive nature of the product, however, the patent was estimated to have a useful life of only 10 years. During 2005, the product was permanently removed from the market under governmental order because of a potential health hazard present in the product. Calculate the amount Vars should charge to expense in 2005, assuming amortization is only recorded at the end of the fiscal year.
Ans: Cost of the patent $540,000 Amortization from 2000 to 2004 (540,000 / 10 X 4) (216,000) Book value Jan. 1, 2004 $324,000 ====== Expense book value in 2005 as permanently impaired.