7. Babe Bhd acquired a line of fashion clothing and its brand name 'Perfect for RM10 million. At the same time, Babe started developing its own line of swimwear for professional swimmers called Cool'. The expenditure

incurred for the year ended 31 December x4 were as follows:

Period

RM m

Expenditure typee

1 January to 31 January

Research as to the extent of market

2

1 February to 31 March

Testing material suitable for products

1 April to 30 June

6

Prototype swimwear and goods design

1 July to 31 August

2

Refinement of swimwear

1 September to 30 November Development work to finalise design

9

Production and launch of products

1 December to 31 December

28

Included in the RM9 million production and launch expenditure are

the costs for upgrading ot machinery of RM4 million, statf training of

RM2 million and market research of RM3 million.

Required:

Discuss how the brand name Pertect and expenditure of RM28 million

should be treated.