Question

Milano Gallery purchases the copyright on a painting for $420,000 on January 1. The copyright is good for 10 more years. The company plans to sell prints for 19 years. Prepare entries to record the purchase of the copyright on January 1 and its annual amortization on December 31.

Answer 1

Step-by-step explanation:

The journal entries are shown below:

On January 1

Copyright A/c Dr $420,000

To Cash A/c $420,000

(Being copyright is purchased)

On December 31

Amortization A/c Dr $42,000

To Accumulated amortization A/c $42,000

(Being annual amortization is recorded)

The computation is shown below:

= Purchase value of copyright ÷ number of goods years

= $420,000 ÷ 10 years

= $42,000