Question

Question 3 Pina Enterprises is a large Canadian company traded on the Toronto Stock Exchange. Pina purchased two copyrights during 2017. The first copyright was purchased on February 1 for $17,500, and was expected to have a useful life until the end of December, 2019. The second copyright was purchased on July 1 for $75,600, and was expected to have an indefinite useful life. Pina's fiscal year-end was December 31. On July 1, 2018, Pina paid $7,020 in legal fees to successfully defend the first copyright in court. On September 1, 2018, Pina determined that the second copyright would no longer have an indefinite useful life, and in fact would have a useful life of another 6 years, beginning September 1, 2018. On April 1, 2019, Pina sold the second copyright for $87,050. Prepare the journal entries on the books of Pina to record the above transactions. (Hint: don’t forget the year-end amortization entries). (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Feb. 1, 2017Jul. 1, 2017Dec. 31, 2017Jul. 1, 2018Dec. 31, 2018Sept. 1, 2018Apr. 1, 2019 Feb. 1, 2017Jul. 1, 2017Dec. 31, 2017Jul. 1, 2018Dec. 31, 2018Sept. 1, 2018Apr. 1, 2019 Feb. 1, 2017Jul. 1, 2017Dec. 31, 2017Jul. 1, 2018Dec. 31, 2018Sept. 1, 2018Apr. 1, 2019 Feb. 1, 2017Jul. 1, 2017Dec. 31, 2017Jul. 1, 2018Dec. 31, 2018Sept. 1, 2018Apr. 1, 2019 Feb. 1, 2017Jul. 1, 2017Dec. 31, 2017Jul. 1, 2018Dec. 31, 2018Sept. 1, 2018Apr. 1, 2019 Apr. 1, 2019 (To record amortization of copyrights) Apr. 1, 2019 (To record the sale of copyright 2) SHOW LIST OF ACCOUNTS LINK TO TEXT LINK TO TEXT LINK TO TEXT

Answer 1

For purchase of copyright

1st Feb 2017 Copyright (1) A/c Dr $17,500 (Explanation- Copyright is an intangible asset so asset a/c is debited)

To Bank $17,500

1st July 2017 Copyright (2) A/c Dr $75,600

To Bank A/c $75,600

31st December 2017 Depreciation A/c Dr $5500 ((The first copyright is depreciated for 11 month out of 35 month To Copyright (1)Cr $5500   (11+12+12) that is from 1st feb to 31st Dec 2019 so $17500divided by 35 and multiplied by 11)).

1st July 2018 Legal Fees A/c Dr $7020 (Legal fees paid $ 7020)

To Bank Cr $7020

31st December 2018 Depreciation A/c Dr $12,300

To Copyright (1) Cr $6000 (Copyright (1) $ 17500-$5500=$12000 is to be amortised in 2 years so 1/2)

To Copyright (2) Cr $6,300   (Copyright (2) $ 75600 divided by 72 multiplied by 6 months from 1st Sept to 31st Dec 2018).

1st April 2019 Sale of copyright (2)

Bank a/c Dr	$ 87050
To Copyright (2) A/c Cr	$ 69300
To Profit on sale of copyrightCr	$ 17750

Explanation: Cost of Copyright 2 ($75600-$6300= $ 69300) as on 1st April 2019

Profit on sale of copyright (($87050-$69300=$17,750))