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Skysong Industries acquired two copyrights during 2020. One copyright related to a textbook that was developed internally at a cost of $17,000. This textbook is estimated to have a useful life of 5 years from September 1, 2020, the date it was published. The second copyright (a history research textbook) was purchased from University Press on December 1, 2020, for $32,000. This textbook has an indefinite useful life.
How should these two copyrights be reported on Skysong’s balance sheet as of December 31, 2020?

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Answer:

Explanation:

The question is asking fro the Reporting of the two copyrights in Skysong's balance sheet as at December 31,2020

Assumption: The first copyright was developed internally while the second copyright was purchased from the University Press

Based on this assumption, therefore,

For Copyright one: Since it was developed internally, it will not reflect in the balance sheet, it will not be recognized as an asset because it does not have any separate legal rights different from the organisation that developed it. As such it will be recorded in the Income statement as an expense

For Copyright two: This is an intangible asset with an indefinite number of useful life. Hence, $32,000 will be reported in the balance sheet as an intangible asset but the cost will only be tested for impairment and not amortized.

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