XYZ company had acquired a company in the beginning of year 2019. Such acquisitions resulted in acquiring a few intangible assets which were categorised into brands and other intangible assets. Brands category included trademarks that were acquired at a total of $ 60,000 and was estimated to have a useful life of 5 years with no residual value. The carrying value of such brands on the date of acquisition was $ 45,000. On 1st July 2020 the company sold such trademark for a total price of $ 40,000. With such proceeds the company acquired another brand at a cost of $ 35,000 with a useful life of 10 years with no residual value. At the year end the company management decided to value the worth of its own brand and include it in the intangible assets. The worth of the company’s own brand was estimated to be $ 100,000. Provide with a detailed treatment for such transactions related to such intangible assets for the year ended 31st December 2020.
XYZ company had acquired a company in the beginning of year 2019. Such acquisitions resulted in acquiring a few intangible assets which were categorised into brands and other intangible assets.
Brands category included trademarks that were acquired at a total of $ 60,000 and was estimated to have a useful life of 5 years with no residual value. The carrying value of such brands on the date of acquisition was $ 45,000. On 1st July 2020 the company sold such trademark for a total price of $ 40,000. With such proceeds the company acquired another brand at a cost of $ 35,000 with a useful life of 10 years with no residual value.
At the year end the company management decided to value the worth of its own brand and include it in the intangible assets. The worth of the company’s own brand was estimated to be $ 100,000.
Provide with a detailed treatment for such transactions related to such intangible assets for the year ended 31st December 2020.
Answer: loss on sale of trademarks RO 2,000, Amortization on acquired brand RO 1,750 & Internally generated brand cannot be recognized as intangible.
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