At the End of 2016, Mirror Productions Determined That One

question 119

Multiple Choice

At the end of 2016, Mirror Productions determined that one of its copyrights was worthless.The copyright had a cost of $320,000.The copyright had been amortized for 8 years of its estimated 25-year legal life.Which of the following statements is the justification for removing the remaining cost of the copyright from the accounting records?

• A) The copyright no longer represents a future benefit to the company.
• B) The federal government does not allow copyrights to be recorded as assets once they are deemed worthless.
• C) The cost of the copyright represents an obligation to return capital contributions to the stockholders.
• D) The cost of the copyright has usefulness that will impact the net income of future accounting periods.

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Definitions:

Straight-line Method

A depreciation technique that allocates an equal amount of depreciation expense each year over the useful life of an asset.

Estimated Salvage Value

The expected value that an asset will realize upon its sale at the end of its useful life, used in computing depreciation.

Depreciable Cost

The total cost of an asset that is subject to depreciation, which includes the purchase price minus any salvage value.

Useful Life

The estimated period of time over which a fixed asset is expected to be usable by the business, influencing depreciation calculations.