Question

Milano Gallery purchases the copyright on an oil painting for $270,000 on January 1, 2017. The copyright legally protects its owner for 10 more years. The company plans to market and sell prints of the original for 19 years. Prepare entries to record the purchase of the copyright on January 1, 2017, and its annual amortization on December 31, 2017.

Answer 1

Answer:

Milano Gallery Journal entry

Jan.1

Dr Copyright 270,000

Cr Cash 270,000

(To Record purchase of Copyright)

Dec.31

Dr Amortization Expense - Copyright 27,000

Cr Accumulated Amortization - Copyright 27,000

(To Record Copyright Amortization)

Amortization Expense of Copyright

= ($270,000 / 10years)

=$27,000

Explanation:

Since the copyright on oil painting on January 1 was 270,000 we have to debit copyright as $270,000 while credit cash as the same amount.

On Dec 31 the copyright of 270,000 also legally protects its owner for 10 more years which is why we divided 270,000 by 10 years making us to arrived at 27,000