IFRS12.11

$120.000 100,000 IFRS12.4 Treasure Land Corporation incurred the following costs in 2020 Cost of laboratory research aimed at discovery of new knowledge Cost of testing in search for product alternatives Cost of engineering activity required to advance the design of a product to the manufacturing stage Prototype testing subsequent to meeting economic viability 210.000 75,000 3505.000 Prepare the necessary 2030 journal entry(ies) for Treasure Land. IFRS12.5 Indicate whether the following items are capitalized or expensed in the current year. a. Purchase cost of a patent from a competitor b. Research costs c. Development costs (after achieving economic viability). d. Organizational costs e. Costs incurred internally to create goodwill. IFRS12.6 Kenoly Corporation owns a patent that has a carrying amount of $300,000. Kenoly expects future net cash flows from this patent to total $210.000 over its remaining life of 10 years. The recover able amount of the patent is $110.000. Prepare Kenoly's journal entry, if necessary, to record the loss on impairment IFRS12.7 Use the information in IFRS12.6. Assume that at the end of the year following the impair ment (after recording amortization expense), the estimated recoverable amount for the patent is $130.000, Prepare Kenoly's journal entry, if needed. IFRS12.8 Waters Corporation purchased Johnson Company 3 years ago and at that time recorded good will of $400,000. The Johnson Division's net assets, including the goodwill have a carrying amount of $800,000. The recoverable amount of the division is estimated to be $1,000,000. Prepare Waters' journal entry, if necessary, to record impairment of the goodwill IFRS12.9 Use the information provided in IFRS12.8. Assume that the recoverable amount of the divi sion is estimated to be 5750,000. Prepare Waters" journal entry, if necessary to record impairment of the goodwill IFRS12.10 Margaret Avery Company from time to time embarks on a research program when a special project seems to offer possibilities. In 2018, the company expends $325.000 on a research project, but by the end of 2018. it is impossible to determine whether any benefit will be derived from it. a. What account should be charged for the $325,000, and how should it be shown in the financial statements? b. The project is completed in 2019, and a successful patent is obtained. The R&D costs to complete the project are $130,000 ($36,000 of these costs were incurred after achieving economie viability). The administrative and legal expenses incurred in obtaining patent number 472-1001-84 in 2019 total $24,000. The patent has an expected useful life of years. Record these costs in journal entry form Also, record patent amortization (full year) in 2019. c. In 2020, the company successfully defends the patent in extended litigation at a cost of $47,200, thereby extending the patent life to December 31, 2027. What is the proper way to account for this cost? Also, record patent amortization (full year) in 2020 d. Additional engineering and consulting costs incurred in 2020 required to advance the design of a new version of the product to the manufacturing stage total $60.000. These costs enhance the design of the product considerably, but it is highly uncertain if there will be a market for the new version of the product. Discuss the proper accounting treatment for this cost. Professional Research IFRS12.11 King Company is contemplating the purchase of a smaller company, which is a distributor of King's products. Top management of King is convinced that the acquisition will result in significant Synergies in its selling and distribution functions. The financial management group (of which you are a part) has been asked to analyze the effects of the acquisition on the combined company's financial state- ments. This is the first acquisition for King and some of the senior statt insist that based on their recol lection of goodwill accounting, any goodwill recorded on the acquisition will result in a "drag" on future camnings for goodwill amortization. Other younger members on the staff argue that goodwill accounting has changed. Your supervisor asks you to research this issue. Instructions Access the IFRS authoritative literature at the IASB website. (Click on the IFRS tab and then register for free elFRS access if necessary.) When you have accessed the documents, you can use the sench coat in your Internet browser to respond to the following questions. (Provide paragraph citations.) a. Identify the accounting literature that addresses goodwill and other intangible asset b. Define goodwill. c. Is goodwill subject to amortization? Explain. d. When goodwill is recognized by a subsidiary, should it be tested for impairment at the consolidated level or the subsidiary level? Discuss. International Financial Reporting Problem Marks and Spencer plc (M&S) IFRS12.12 The financial statements of M&S are presented in Appendix E. The company's complete annual report, including the notes to the financial statements, is available online Instructions Refer to M&S's financial statements and the accompanying notes to answer the following questions. a. Does M&S report any intangible assets and goodwill in its financial statements and accompanying notes? Briefly explain. b. How much selling and marketing expenses does M&S report in 2016 and 2017? Briefly discuss the significance of these expenses to M&S's operating results. Answers to IFRS Self-Test Questions 1. C 2. a 3. d 4. b 5. d bilans should be intercom encies $120.000 100,000 IFRS12.4 Treasure Land Corporation incurred the following costs in 2020 Cost of laboratory research aimed at discovery of new knowledge Cost of testing in search for product alternatives Cost of engineering activity required to advance the design of a product to the manufacturing stage Prototype testing subsequent to meeting economic viability 210.000 75,000 3505.000 Prepare the necessary 2030 journal entry(ies) for Treasure Land. IFRS12.5 Indicate whether the following items are capitalized or expensed in the current year. a. Purchase cost of a patent from a competitor b. Research costs c. Development costs (after achieving economic viability). d. Organizational costs e. Costs incurred internally to create goodwill. IFRS12.6 Kenoly Corporation owns a patent that has a carrying amount of $300,000. Kenoly expects future net cash flows from this patent to total $210.000 over its remaining life of 10 years. The recover able amount of the patent is $110.000. Prepare Kenoly's journal entry, if necessary, to record the loss on impairment IFRS12.7 Use the information in IFRS12.6. Assume that at the end of the year following the impair ment (after recording amortization expense), the estimated recoverable amount for the patent is $130.000, Prepare Kenoly's journal entry, if needed. IFRS12.8 Waters Corporation purchased Johnson Company 3 years ago and at that time recorded good will of $400,000. The Johnson Division's net assets, including the goodwill have a carrying amount of $800,000. The recoverable amount of the division is estimated to be $1,000,000. Prepare Waters' journal entry, if necessary, to record impairment of the goodwill IFRS12.9 Use the information provided in IFRS12.8. Assume that the recoverable amount of the divi sion is estimated to be 5750,000. Prepare Waters" journal entry, if necessary to record impairment of the goodwill IFRS12.10 Margaret Avery Company from time to time embarks on a research program when a special project seems to offer possibilities. In 2018, the company expends $325.000 on a research project, but by the end of 2018. it is impossible to determine whether any benefit will be derived from it. a. What account should be charged for the $325,000, and how should it be shown in the financial statements? b. The project is completed in 2019, and a successful patent is obtained. The R&D costs to complete the project are $130,000 ($36,000 of these costs were incurred after achieving economie viability). The administrative and legal expenses incurred in obtaining patent number 472-1001-84 in 2019 total $24,000. The patent has an expected useful life of years. Record these costs in journal entry form Also, record patent amortization (full year) in 2019. c. In 2020, the company successfully defends the patent in extended litigation at a cost of $47,200, thereby extending the patent life to December 31, 2027. What is the proper way to account for this cost? Also, record patent amortization (full year) in 2020 d. Additional engineering and consulting costs incurred in 2020 required to advance the design of a new version of the product to the manufacturing stage total $60.000. These costs enhance the design of the product considerably, but it is highly uncertain if there will be a market for the new version of the product. Discuss the proper accounting treatment for this cost. Professional Research IFRS12.11 King Company is contemplating the purchase of a smaller company, which is a distributor of King's products. Top management of King is convinced that the acquisition will result in significant Synergies in its selling and distribution functions. The financial management group (of which you are a part) has been asked to analyze the effects of the acquisition on the combined company's financial state- ments. This is the first acquisition for King and some of the senior statt insist that based on their recol lection of goodwill accounting, any goodwill recorded on the acquisition will result in a "drag" on future camnings for goodwill amortization. Other younger members on the staff argue that goodwill accounting has changed. Your supervisor asks you to research this issue. Instructions Access the IFRS authoritative literature at the IASB website. (Click on the IFRS tab and then register for free elFRS access if necessary.) When you have accessed the documents, you can use the sench coat in your Internet browser to respond to the following questions. (Provide paragraph citations.) a. Identify the accounting literature that addresses goodwill and other intangible asset b. Define goodwill. c. Is goodwill subject to amortization? Explain. d. When goodwill is recognized by a subsidiary, should it be tested for impairment at the consolidated level or the subsidiary level? Discuss. International Financial Reporting Problem Marks and Spencer plc (M&S) IFRS12.12 The financial statements of M&S are presented in Appendix E. The company's complete annual report, including the notes to the financial statements, is available online Instructions Refer to M&S's financial statements and the accompanying notes to answer the following questions. a. Does M&S report any intangible assets and goodwill in its financial statements and accompanying notes? Briefly explain. b. How much selling and marketing expenses does M&S report in 2016 and 2017? Briefly discuss the significance of these expenses to M&S's operating results. Answers to IFRS Self-Test Questions 1. C 2. a 3. d 4. b 5. d bilans should be intercom encies