Question

As the start of a 20-year development project, alston studios successfully purchased several copyrights for scripts associated with a popular 12-book series that they plan to make into movies. if they consider this a research and development cost, how should they record it? select answer from the options below

A. they should capitalize it and amortize it over the life of the project.
B. they should expense it as incurred.
C. they should capitalize it and amortize it over the life of the copyright.
D. they should expense it after the last movie is complete.

Answer 1

Alston Studios c. should capitalize the copyright purchase and amortize it over the life of the copyright, treating it as an intangible asset.

Step-by-step explanation:

When Alston Studios successfully purchased several copyrights for scripts associated with a popular 12-book series that they plan to make into movies, and consider this a research and development cost, the proper accounting treatment would be to capitalize it and amortize it over the life of the copyright. This means that they would record the expense on the balance sheet as an intangible asset and gradually expense it over the period for which they expect to use the copyright, which could span several years. They should not expense it all at once as incurred or after the last movie is complete, as this would not match the expense with the revenue generated over time.