On January 2 2022 Dabney Company purchased a copyright from North Company for $200000.The copyright was recorded on North's books for $160000.It is estimated that the copyright has a remaining useful life of 2 years.Use the following tabular analysis to record the sale of the copyright by North.
A)Decrease Copyrights $160000 increase Revenues $40000 and increase Cash $200000.
B)Increase Revenues and Cash $200000.
C)Increase Expenses and decrease Patents $80000.
D)Increase Cash and decrease Patents $200000.

Question

On January 2 2022 Dabney Company purchased a copyright from North Company for $200000.The copyright was recorded on North's books for $160000.It is estimated that the copyright has a remaining useful life of 2 years.Use the following tabular analysis to record the sale of the copyright by North. 
A)Decrease Copyrights $160000 increase Revenues $40000 and increase Cash $200000. 
B)Increase Revenues and Cash $200000. 
C)Increase Expenses and decrease Patents $80000. 
D)Increase Cash and decrease Patents $200000.

Quizplus · Accepted Answer

The sale of the copyright resulted in an increase in cash of $200000 for North Company. However, since the copyright was recorded on North's books for $160000, a gain of $40000 ($200000 sale price - $160000 book value) should be recognized as revenue. Additionally, since the copyright has a remaining useful life of 2 years, the $40000 gain should be amortized over the remaining life of the copyright. Therefore, the entry to record the sale of the copyright by North should be a decrease in Copyrights for $160000, an increase in Revenues for $40000, and an increase in Cash for $200000.

On January 2 2022 Dabney Company Purchased a Copyright from North