Brief Exercise 7-12 Calculate amortization expense (L07-5) In early January, Burger Mania acquired 100% of the common stock of the Crispy Taco restaurant chain. The purchase price allocation included the following items: $4 million, patent; $5 million, trademark considered to have an indefinite useful life; and $6 million. goodwill. Burger Mania's policy is to amortize intangible assets with finite useful lives using the straight-line method, no residual value, and a five-year service life. What is the total amount of amortization expense that would appear in Burger Mania's income statement for the first year ended December 31 related to these items? (Enter your answer in dollars, not in millions (i.e. 5 should be entered as 5,000,000).) Amortization expense

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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**Brief Exercise 7-12 Calculate Amortization Expense (LO7-5)**

In early January, Burger Mania acquired 100% of the common stock of the Crispy Taco restaurant chain. The purchase price allocation included the following items: $4 million, patent; $5 million, trademark considered to have an indefinite useful life; and $6 million, goodwill. Burger Mania’s policy is to amortize intangible assets with finite useful lives using the straight-line method, no residual value, and a five-year service life.

What is the total amount of amortization expense that would appear in Burger Mania’s income statement for the first year ended December 31 related to these items? *(Enter your answer in dollars, not in millions (i.e. 5 should be entered as 5,000,000).)*

[Amortization expense text box]

**Explanation:**

In this exercise, the focus is on calculating the amortization expense for intangible assets that have finite useful lives. The only asset in this case is the patent, which has a value of $4 million and a useful life of five years. Amortization is calculated using the straight-line method, meaning the cost is evenly distributed over the service life.

**Calculation:**
- Patent value: $4,000,000
- Useful life: 5 years
- Annual amortization expense = $4,000,000 / 5 = $800,000

Therefore, the total amortization expense for the first year is $800,000. The trademark and goodwill are not amortized as they have an indefinite useful life and no defined period for amortization, respectively.
Transcribed Image Text:**Brief Exercise 7-12 Calculate Amortization Expense (LO7-5)** In early January, Burger Mania acquired 100% of the common stock of the Crispy Taco restaurant chain. The purchase price allocation included the following items: $4 million, patent; $5 million, trademark considered to have an indefinite useful life; and $6 million, goodwill. Burger Mania’s policy is to amortize intangible assets with finite useful lives using the straight-line method, no residual value, and a five-year service life. What is the total amount of amortization expense that would appear in Burger Mania’s income statement for the first year ended December 31 related to these items? *(Enter your answer in dollars, not in millions (i.e. 5 should be entered as 5,000,000).)* [Amortization expense text box] **Explanation:** In this exercise, the focus is on calculating the amortization expense for intangible assets that have finite useful lives. The only asset in this case is the patent, which has a value of $4 million and a useful life of five years. Amortization is calculated using the straight-line method, meaning the cost is evenly distributed over the service life. **Calculation:** - Patent value: $4,000,000 - Useful life: 5 years - Annual amortization expense = $4,000,000 / 5 = $800,000 Therefore, the total amortization expense for the first year is $800,000. The trademark and goodwill are not amortized as they have an indefinite useful life and no defined period for amortization, respectively.
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