On January 1, Year 1, Vanguard Company purchased a copyright for $12,000. Vanguard estimated the remaining useful life of the copyright to be 6 years.Which of the following correctly shows the effect of the first year's amortization of Vanguard's copyright?
A)Option A
B)Option B
C)Option C
D)Option D

Question

On January 1, Year 1, Vanguard Company purchased a copyright for $12,000. Vanguard estimated the remaining useful life of the copyright to be 6 years.Which of the following correctly shows the effect of the first year's amortization of Vanguard's copyright? 
A)Option A 
B)Option B 
C)Option C 
D)Option D

Quizplus · Accepted Answer

The annual amortization expense for the copyright is calculated as $12,000/6 = $2,000. Therefore, the correct journal entry for the first year's amortization would be to debit Amortization Expense- Copyright for $2,000 and credit Copyright for $2,000. Option B correctly reflects this journal entry. Option A incorrectly debits Copyright for $2,000 and credits Amortization Expense- Copyright for $2,000. Option C debits Copyright for $2,000 and credits Accumulated Amortization- Copyright for $2,000, which is incorrect as Accumulated Amortization- Copyright is a contra asset account and should have a credit balance, not a debit balance. Option D debits Amortization Expense for $12,000, which is incorrect as the full cost of the copyright cannot be amortized in one year.

On January 1, Year 1, Vanguard Company Purchased a Copyright