Why into 2 extra ?
An analyst in the nance department of BOOLDO S.A., a French corporation,
is computing the amortization of a customer list, an intangible asset, for the s-
cal year ended 31 December 2009. She gathers the following information about
the asset:
Acquisition cost €2,300,000
Acquisition date 1 January 2008
Expected residual value at time of acquisition €500,000
the customer list is expected to result in extra sales for three years after acquisition.
the present value of these expected extra sales exceeds the cost of the list.
If the analyst uses the straight-line method, the amount of accumulated amorti-
zation related to the customer list as of 31 December 2009 is closest to:
A €600,000.
B €1,200,000.
C €1,533,333.
Ans B
Amortisable value is 2300000-500000=1800000 (cost – residual value)
Amortisation per year=1800000/3=600000 (3years is useful life)
accumulated amortisation Means amortisation amount till 31 december 2009 so amount for 2 years(1 January 2008 to 31 December 2009)
so accumulated amortisation is 600000*2=1200000
*2 is because we have used it for 2 years(1jan 2008 to 31 December 2009)
kyoki accumulated amortization amount puch rha hai at 31st dec 2009 or customer list acquire ki thi 1st jan 2008 toh accumulated amortization amount 2 saal ka lgega. amortization amount for first year is on SLM = (2300000-500000)/3 = 600000. then accumulated amortization amount at 31st dec 2009 is 2*600000= 1200000.
Depreciation as per SLM = (OC – SV)/ useful life
The acquisition has taken place on 1st Jan 2008 & we have to calculate accumulated dep till 31 dec 2009. Hence we will multiply the annual depreciation expense by 2 to get the dep for 2 years which will come out be an amount of 120000