On January $1,$ year $1,$ Sip Co$.$ signed a five$-$year contract enabling it to use a patented manufacturing process beginning in year $1.$ A royalty is payable for each product produced, subject to a minimum annual fee. Any royalties in excess of the minimum will be paid annually. On the contract date, Sip prepaid a sum equal to two years' minimum annual fees. In year $1,$ only minimum fees were incurred. The royalty prepayment should be reported in Sip's December $31,$ year $1$ financial statements as

Question $8$ options:

A noncurrent asset.

A current asset and an expense.

An expense only.

A current asset and noncurrent asset.