In early January 2014 Kara Corporation applied for and

received #2210
In early January 2014, Kara Corporation applied for and received approval for a trade name,
incurring legal costs of $45,000. In January 2 015, Kara incurred $24,300 of legal fees in a
successful defence of its trade name.Instructions(a) Management determines that this asset has
a limited useful life. Identify the variables that must be considered in determining the appropriate
amortization period for this trade name.(b) Calculate amortization for 2014; carrying amount at
December 31, 2014; amortization for 2015; and carrying amount at December 31, 2015, if the
company amortizes the trade name over its 15-year legal life.(c) Repeat part (b), assuming a
useful life of five years.(d) Assume the trade name is assessed as having an indefinite life upon
initial acquisition. Explain the accounting implications.(e) Assume the role of a potential investor
in Kara. Comment on the estimated useful life of the trade name, and its effects on the
company's financial statements.View Solution:
In early January 2014 Kara Corporation applied for and received

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