Question

Hops Co. purchased a copyright from Wall Co. for $40,000 on July 1, 2017. Expenditures of $17,000 for unsuccessful litigation in defense of the copyright were paid on July 1, 2020. Hops estimated that the useful life of the copyright will be 20 years from the date of acquisition.

What is the 2020 amortization expense?

Answer 1

Cost of the Copyright - $40,000

Purchase Date - 01st July, 2017

Expenditure for unsuccessful defense - $17,000

Expenditure date - 01st July, 2020.

As noted in the facts above, there has been an expense of $17,000 on the 1st of July, 2020 in an unsuccessful litigation in the defense of copyright. An unsuccessful defense is generally expensed as incurred as this expense does not proudce any additional value to the asset.

Amortization Expense for the Copyright = Cost of the patent/Estimated useful life = $40,000/20 years = $2,000 per year

	Particulars	Debit	Credit
12/31/2020	Amortization Expenses A/c Dr.	2,000
	To Copyrights A/c		2,000
	(To record the amortization expenses for Copyrights on 12/31/2020)