Question

An intangible asset with an estimated useful life of 30 years was acquired on January 1, 2007, for $540,000. On January 1, 2017, a review was made of intangible assets and their expected service lives, and it was determined that this asset had an estimated useful life of 30 more years from the date of the review. What is the amount of amortization for this intangible in 2017?

Short answer

There will be two separate computations of the amount of amortization because the asset's projected useful life has changed, and the amount of amortization for this intangible asset in 2017 will be $12,000.

Step-by-step solution

Calculation

Initial asset value	$540000
Estimated years of amortization	30
Yearly Amortization(1)	$18000
Amortization from 2007 to 2016	($180000)
Asset value on January 1, 2017	$360000
Estimated years of amortization	30
Yearly Amortization(2)	$12000
Amortization 2017	$12000

Explanation

The useful life of the intangible asset was 30 years on January 1, 2007, and also 30 years when reviewed on January 1, 2017. So the total useful life of the intangible asset was 40 years. The asset was acquired for $540,000 on January 1, 2007.