Question

Metlock Industries acquired two copyrights during 2020. One copyright related to a textbook that was developed internally at a cost of $9,300. This textbook is estimated to have a useful life of 3 years from September 1, 2020, the date it was published. The second copyright (a history research textbook) was purchased from University Press on December 1, 2020, for $40,000. This textbook has an indefinite useful life.
Required:
a) How should these two copyrights be reported on Metlock’s balance sheet as of December 31, 2020?

Answer 1

Answer:

The first book will not be reported on the balance sheet, but the second copyright will be reported at the full purcahse price.

Explanation:

1. A textbook that was developed internally: The $9,300 cost incurred must be expensed. As a result of this. the copyright will only be reported on the income statement but not on the balance sheet.

2. The second copyright (a history research textbook): The $40,000 purchase cost of this will be reported on the balnace sheet in full. But there will not be amortization since it has an indefinite useful life.