Question

Question: Sinise Industries acquired two copyrights during 2017. One copyright related to a textbook that was developed internally at a cost of \(9,900. This textbook is estimated to have a useful life of 3 years from September 1, 2017, the date it was published. The second copyright (a history research textbook) was purchased from University Press on December 1, 2017, for \)24,000. This textbook has an indefinite useful life. How should these two copyrights be reported on Sinise’s balance sheet as of December 31, 2017?

Short answer

Copyright No. 1 should be expensed and Copyright No. 2 should be capitalized in Sinise’s balance sheet as of December 31, 2017.

Step-by-step solution

Step1- Meaning of Copyright

The legal right of the owner of an intellectual property is known as copyright. Simply put, copyright refers to the ability to duplicate. This implies that only the original producers of items, as well as anybody they provide permission to, have the sole right to replicate the work.

Step2- Explanation

Copyright No. 1 for $9,900should be expensed and therefore not reported on the balance sheet.

Copyright No. 2 for $24,000 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 balance sheet at a cost of $24,000 as of December 31, 2017.