a. How much should the copy right be initially recognized?
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On January 2, 2018, XYZ acquired copy rights to the original recording
of a famous singer named Sarah Lraen. The agreement with the singer allows the company to
record and rerecord the songs of the singer for a period of 5 years. During the initial 6 month
period of the agreement, the singer was very sick and consequently cannot record. The studio
time that was blocked by the company had to be paid even during the period the singer could
not sing. The following costs were incurred by the company:
-Legal cost of acquiring the copy rights, P15M
- Documentation expenses related to the copy acquisition, 1.5M
-Operational loss (studio time lost etc.), 3M
- Massive advertising campaign to launch the artist, 1.5M
a. How much should the copy right be initially recognized?
b. What is the carrying value of the copy right as of December 31, 2019?
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