Brief Exercise 12-13 Sinise Industries acquired two copyrights during 2014. One
ID: 2487859 • Letter: B
Question
Brief Exercise 12-13 Sinise Industries acquired two copyrights during 2014. One copyright related to a textbook that was developed internally at a cost of $12,200. This textbook is estimated to have a useful life of 4 years from September 1, 2014, the date it was published. The second copyright (a history research textbook) was purchased from University Press on December 1, 2014, for $21,700. This textbook has an indefinite useful life. How should these two copyrights be reported on Sinise’s balance sheet as of December 31, 2014?
Copyright No. 1 $
Copyright No. 2 $
Explanation / Answer
Identifiable Assets having no physical existence are called Intangible Assets. For example Goodwill, Patents, Copyright etc. Intangible Assets either acquired or Internally develoopoed.
In case of acquisition of Intangible assets such assets are recorded at their fair value, while in case of internally generated intangible assets these assets are recognized at the cost incurred in development phase.
Amortization is the process of expensing out intangible assets over their useful life. It is in effect the depreciation of intangible assets. Some intangible assets have indefinite or unlimited useful life and Others have a definite useful life and are amortized over their useful life. Most of intangible assets are amortized using straight line method. Useful life is the shorter of legal life and economic life.
Sinise Industries has Developed one Copyright internally hence it should be recognized at cost. Second Copyright has been acquired for $21700 and it should be recognized at Fair Value or Cost whichever is more clearly evident.
Internally Developed Copyright has usefull life 4 year hence it should be amortized over 4 year. The acquired Copyright textbook has an indefinite useful life hence it may not be amortized but it should be tested for Impairment periodically.
Value in Balance Sheet-
Copyright No. 1 $11183 (12200-1017)
Copyright No. 2 $21700
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