PROBLEM

Beehive Limited is a company that owns a number of intangible assets. A list of the intangible assets owned by Beehive Limited together with some detail is provided below:

A brand called 'Orange blossom'. This brand was acquired on April 1, 2016 for P2 000 000. The life of the 'Orange blossom' brand is expected to be ten years. There is no active market for this brand.

A brand called 'Infused ginger'. This brand has been developed by Beehive Limited during 2016 at a cost of P300 000 (incurred in May 2016). The life of the 'Infused ginger' brand is expected to be ten years. There is no active market for this brand.

A lollipop that can be used as a flashlight in the dark is currently being developed. The initial research into the technical feasibility of this product and its potential market cost P800 000 during 2014. Development began on March 1, 2014 and has cost Beehive Limited a total of P34 000 000 to December 31, 2016. All criteria were met for capitalization of development costs in 2014. Throughout 2015, cash flow problems resulted in Beehive Limited being unsure of their ability to continue the development of this prototype. The cash flow problems were resolved in early January 2016 with the securing of a loan liability from Dodge Bank. Development costs were incurred evenly over the three years.

The right to manufacture under a patent for a period of five years was purchased on September 1, 2016 for P5 000

000. The patent has an expected life of twenty years. This patent may be renewed for a further period of three years for a sum of P30 000 which is considered insignificant cost.

Required: Determine the following:

1.Capitalizable cost of:

a.Orange blossom.

b.Infused Ginger

2.On Lollipop:

a.Capitalizable cost as of December 31, 2014.

b.Capitalizable cost as of December 31, 2015.

c.Capitalizable cost as of December 31, 2016.

3.On Patent:

a.Amortization period.

b.Amortization for 2016.