(Accounting for Trade Name) In early January 2003, Gayle Crystal Corporation applied for a trade name, incurring legal costs of $16,000. In January of 2004, Gayle Crystal incurred $7,800 of legal fees in a successful defense of its trade name.

Instructions

(a) Compute 2003 amortization, 12/31/03 book value, 2004 amortization, and 12/31/04 book value if the company amortizes the trade name over 10 years.

(b) Compute the 2004 amortization and the 12/31/04 book value, assuming that at the beginning of 2004, Crystal determines that the trade name will provide no future benefits beyond December 31, 2007.

(c) Ignoring the response for part (b), compute the 2005 amortization and the 12/31/05 book value, assuming that at the beginning of 2005, based on new market research, Crystal determines that the fair value of the trade name is $15,000. Estimated total future cash flows from the trade name is $16,000 on January 3, 2005.