the franchise on Alexander’s books on January 1, 2013, was $600,000. The franchise agreement had anestimated useful life of 20 years. Because Tartabull must enter a competitive bidding at the end of 2022, it isunlikely that the franchise will be retained beyond 2022. What amount should be amortized for the year endedDecember 31, 2014?
3.On January 1, 2013, Tartabull incurred organization costs of $500,000. What amount of organization expenseshould be reported in 2014?
4.Tartabull purchased the license for distribution of a popular consumer product on January 1, 2014, for$400,000. It is expected that this product will generate cash flows for an indefinite period of time. The licensehas an initial term of 5 years but by paying a nominal fee, Tartabull can renew the license indefinitely forsuccessive 5-year terms. What amount should be amortized for the year ended December 31, 2014?
InstructionsAnswer the questions asked about each of the situations.
3. Thermo Corporation was organized in 2013 and began operations at the beginning of 2014. The company isinvolved in energy development. The following costs were incurred prior to the start of operations. Costs of meetings of incorporators to discussorganizational activities$ 17,000Attorney’s fees in connection with organization of thecompany26,000Purchase of testing equipment61,000Costs of meetings with potential customers3,000State filing fees to incorporate1,000$108,000Instructions(a)Compute the total amount of organization costs incurred by Thermo.