Services Ltd incurred research and development costs of $10 million on a project to develop product A in 2018. The research phase can be clearly distinguished from the development phase of the project. Total costs in the research phase are $6 million, and in the development phase total costs are $4 million. All of the IAS 38 criteria have been met for recognition of the development costs as an asset. Product A was brought to market in Year 2019 and is expected to be marketable for five years. Total sales of Product A are estimated at more than $100 million.
- Summarize and calculate in numerical tables the difference in income, total assets, and total shareholders’ equity related to Product A over its five-year life under the two different sets of accounting rules.
this question requires the amount of money to be showed at the end of each year in a numeric table for all instances (income, assets, equity) for us GAAP and IFRS. even with no impact or amortisation the figures need to be clearly stated for the end of each year values.
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- Van Frank Telecommunications has a patent on a cellular transmission process. The company has amortized thepatent on a straight-line basis since 2014, when it was acquired at a cost of $9 million at the beginning of thatyear. Due to rapid technological advances in the industry, management decided that the patent would benefit thecompany over a total of six years rather than the nine-year life being used to amortize its cost. The decision wasmade at the beginning of 2018.Required:Prepare the year-end journal entry for patent amortization in 2018. No amortization was recorded during the year.arrow_forwardOn January 1, 2019, Sinaran purchased equipment. Following are the costs incurred in connection with the purchase of this equipment: - Purchase price of IDR 500,000,000 plus 10% VAT (IDR 50,000,000) which can be credited - The company pays an independent professional to modify the equipment to fit the specifications desired by the company. The fee paid for professional services is IDR 40,000,000 and for the spare part costs for the modification purposes IDR 10,000,000. - The cost of testing the equipment so that it functions according to its purpose is Rp.25,000,000. - The proceeds from the sale of goods resulting from the testing process are IDR 5,000,000. Requested: Calculate the cost of the equipment according to PSAK 16arrow_forwardCayman Corp. incurred $ 140,000 of basic research and $ 35,000 of development costs to develop a product for which a patent was granted on January 2, 2015. Legal fees and other costs associated with registration of the patent totalled $ 50,000. On March 31, 2020, Cayman paid $ 75,000 for legal fees in a successful defence of the patent. The total amount capitalized for the patent through March 31, 2020 should be $ 265,000. $ 160,000.arrow_forward
- David Ltd commences operations on 1 July 2020 On the same date, it purchases a machine at a cost of $1000 000 The machine is expected to have a useful life of 4 years, with benefits being uniform throughout its life. It will have no residual value at the end of 4 years Hence, for accounting purposes the depreciation expense would be $250 000 per year For taxation purposes, the ATO allows the company to depreciate the asset over three years—that is, $200 000 per year The profit before tax of the company for each of the next four years (years ending 30 June) is $600 000, $700 000, $800 000 and $900 000 respectively The tax rate is 30 per cent. Required: 1. Calculate the taxable profit on 30 June 2021, 30 June 2022, 30 June 2023.2. Record the necessary journal entries.arrow_forwardIn 2016, Bambung Corporation acquired production machinery at a cost of £420,000. In 2019, when accumulated depreciation was £103,000, Bambung reported an impairment loss of £77,000. Now, in 2023, the machinery has a book value of £193,000. The fair value less costs to sell of the machinery is £215,000 and its value in use is £192,000. During impairment testing, Bambung recognized the possibility of a reversal of the previous impairment loss. What amount, if any, should Bambung recognize as a reversal of impairment loss under IFRS? Group of answer choices -0- £1000 £22,000 £77,000arrow_forwardIn 2016, TallyHo Farms acquired production machinery at a cost of £430,000. In 2019, when accumulated depreciation was £180,000, Bambung reported an impairment loss of £78,000. Now, in 2023, the machinery has a book value of £142,000. The fair value less selling costs of the machinery is £273,000 and its value in use is £215,000. During impairment testing, Bambung recognized the possibility of a reversal of the previous impairment loss. What amount, if any, should Bambung recognize as a reversal of impairment loss under IFRS? Group of answer choices £58,000 £131,000 £73,000 £78,000 PreviousNextarrow_forward
- A company prepares its financial statements according to International Financial Reporting Standards. During 2024 the company incurred $1,265,000 in research expenditures to develop a new product. An additional $776,000 in development expenditures were incurred after technological and commercial feasibility was established and after the future economic benefits were deemed probable. The project was successfully completed and the new product was patented before the end of the 2024 fiscal year. Sale of the product began in 2023. What amount of the above expenditures would be expensed in the 2024 income statement?arrow_forwardVan Frank Telecommunications has a patent on a cellular transmission process. The company has amortized the patent on a straight-line basis since 2020, when it was acquired at a cost of $21.6 million at the beginning of that year. Due to rapid technological advances in the industry, management decided that the patent would benefit the company over a total of six years rather than the nine-year life being used to amortize its cost. The decision was made at the beginning of 2024. Required: Prepare the year-end journal entry for patent amortization in 2024. No amortization was recorded during the year. Record amortization expensearrow_forwardOn January 4, 2015, a research project undertaken by Nasja Ltd. was completed and a patent was approved. The research phase of the project incurred costs of $150,000, and legal costs incurred to obtain the patent approval were $20,000. The patent is assessed to have a useful life to 2025, or for ten years. Early in 2016, Nasja successfully defended the patent against a competitor, incurring a legal cost of $22,000. This set a precedent for Nasja who was able to reassess the patent’s useful life to 2030. During 2017, Nasja was able to create a product design that was feasible for commercialization, but no more certainty was known at that time. Costs to get the product design to this stage were $250,000. Additional engineering and consulting fees of $50,000 were incurred to advance the design to the manufacturing stage. Nasja follows IFRS. Required: a. Prepare all the relevant journal entries for the project for 2015 to 2017, inclusive. b. What is the accounting treatment for the…arrow_forward
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