Amortization Expense Calculation for Zero Calories

Overview of Amortization of Intangible Assets

  • Definition of Amortization: Amortization is the gradual writing off of the initial cost of an intangible asset over its useful life.

Key Details

  • Purchase of Patent:
    • Date of Purchase: January 1, 2021
    • Cost of Patent: $45,000
    • Residual Value: $0
    • Useful Life: 5 years

Amortization Method

  • Straight-Line Method: The straight-line method involves spreading the cost of the patent evenly over its useful life.

Calculation of Amortization Expense

  • Formula for Amortization Expense:
    extAmortizationExpense=extCostofPatent−extResidualValueextUsefulLifeext{Amortization Expense} = \frac{ ext{Cost of Patent} - ext{Residual Value}}{ ext{Useful Life}}

  • Applying the Numbers:

    • Cost: $45,000
    • Residual Value: $0
    • Useful Life: 5 years

    extAmortizationExpense=45000−05=450005=9000ext{Amortization Expense} = \frac{45000 - 0}{5} = \frac{45000}{5} = 9000

Result for Year Ended December 31, 2022

  • Amortization Period:

    • From January 1, 2021, to December 31, 2022, is 2 years.

  • Total Amortization for 2021 and 2022:

    • Annual Amortization Expense: $9,000
    • Total for 2 Years:
      extTotalAmortization=9000imes2=18000ext{Total Amortization} = 9000 imes 2 = 18000

Conclusion of Amortization Expense

  • The answer to the multiple-choice question regarding the amortization expense for the year ended December 31, 2022, is $9,000.

Multiple Choice Options

  • $0.
  • $45,000.
  • $18,000.
  • $9,000.