Question

Pina Colada Industries Ltd. acquired two copyrights during 2020. One copyright was on a textbook that was developed internall

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Answer #1

Copyright No. 1 should be expensed. It would be reflected on the December 31, 2020 Income Statement at $0

Copyright No. 2 should be capitalized. It would be reflected on the December 31, 2020 Balance Sheet at $53,900

Explanation:

Copyright No. 1 for $35,600 should be expensed and therefore not reported on the balance sheet.

Copyright No. 2 for $53,900 should be capitalized. Because the useful life is indefinite, copyright No. 2 should be tested at least annually for impairment using a fair value test. It would be reflected on the December 31, 2014 balance sheet at its cost of $53,900.

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