Question
In: Accounting
On January 1, 2017, Sunland Company purchased a copyright for $2292000, having an estimated useful life...
On January 1, 2017, Sunland Company purchased a copyright for
$2292000, having an estimated useful life of 16 years. In January
2021, Sunland paid $339000 for legal fees in a successful defense
of the copyright. Copyright amortization expense for the year ended
December 31, 2021, should be
Solutions
Expert Solution
Cost of copyright = $2,292,000
Useful life = 16 years
Annual amortization expense = Cost of copyright/ Useful life
= 2,292,000/16
= $143,250
Accumulated amortization expense for 4 years (2017 - 2020)= Annual amortization expense x 4
= 143,250 x 4
= $573,000
Book value of copyright on January 1, 2021 = Cost of copyright - Accumulated amortization expense for 4 years (2017 - 2020)
= 2,292,000-573,000
= $1,719,000
Legal fee on successfully defending the copyright = $339,000
Revised book value of copyright on January 1, 2021 = Book value of copyright on January 1, 2021 + Legal fee on successfully defending the copyright
= 1,719,000+339,000
= $2,058,000
Remaining useful life = 12 years
Revised annual amortization expense = Revised book value of
copyright on January 1, 2021/ Remaining useful life
= 2,058,000/12
= $171,500
Copyright amortization expense for the year ended December 31, 2021, should be $171,500.
Kindly comment if you need further assistance. Thanks
ekkarill92 answered 1 year agoRelated Solutions
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