SKY Company purchased a broadcast license for $2,500,000 on January 1, 2020. The license is valid for 5 years, whereafter it can be renewed at a minimal cost for an indefinite number of 5- year periods if the company complies with the broadcasting rules. The company spends a further $75,000 on legal and registration fees and $450,000 for market research conducted internally.

1. What will the cost of the broadcasting license be?

2. What will the useful life be? Justify your answer.

Prepare the entries for 2020. Please show the workings.