Kingbird Industries acquired two copyrights during 2017. One copyright related t
ID: 2583182 • Letter: K
Question
Kingbird Industries acquired two copyrights during 2017. One copyright related to a textbook that was developed internally at a cost of $7,500. This textbook is estimated to have a useful life of 3 years from September 1, 2017, the date it was published. The second copyright (a history research textbook) was purchased from University Press on December 1, 2017, for $20,000. This textbook has an indefinite useful life.
How should these two copyrights be reported on Kingbird’s balance sheet as of December 31, 2017?
Should not be reported on Balance SheetShould be reported on Balance Sheet
Copyright No. 2 $Should not be reported on Balance SheetShould be reported on Balance Sheet
Explanation / Answer
Copyright No. 1 $7,500 Should not be reported on Balance Sheet
Explanation : The full cost of $7,500 relating to Copyright No. 1 should be expensed as it was develop internally & therefore not to be shown in Balance sheet .
Copyright No. 2 $20,000 . Should be reported on Balance Sheet
Explnation : The full cost second copyright should be capitalized as it was purchased from University Press & since it has an indefinite useful life , there would be no amortization . However it is subjected to impairment testing in future period depanding on its fair value.
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