KUI Company owns a copyright with an estimated 10-year useful life,a zero salvage value,and an historical cost of $20,000.What is the effect on net income of making the proper adjusting entry at year-end?
A)The adjustment will decrease net income by $20,000.
B)The adjustment will increase net income by $2,000.
C)The adjustment will decrease net income by $2,000.
D)The adjustment will have no affect on net income,but it will reduce net operating cash flows by $2,000.

Question

Quizplus · Accepted Answer

The adjusting entry at year-end would involve recognizing $2,000 of amortization expense ($20,000 historical cost/10-year useful life). This expense would decrease net income by $2,000. Therefore, the correct answer is C, "The adjustment will decrease net income by $2,000."

KUI Company Owns a Copyright with an Estimated 10-Year Useful