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Answer: Recorded on the balance sheet at historical cost.
The correct answer is **A** because the license has an indefinite useful life and is not amortized. Intangible assets with indefinite lives, such as licenses that can be renewed at minimal cost and relate to products expected to be sold indefinitely, are not amortized. Instead, they are carried on the balance sheet at historical cost and tested annually for impairment. - **B** and **C** are incorrect because the license's indefinite life means it should not be amortized. Amortization applies only to intangible assets with finite useful lives.
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A company acquires a 5-year license for a product it intends to sell indefinitely. The license can be renewed at minimal cost. How should the license be accounted for?
A
Recorded on the balance sheet at historical cost.
B
Amortized using the straight-line method over its estimated useful life.
C
Amortized using the units-of-production method over its estimated useful life.