Question
QUESTION 1 (6 marks) Saxton is a well-known concrete machine manufacturer. They are currently dissatisfied with the quality of the current splendid finishing (a part
QUESTION 1 (6 marks)
Saxton is a well-known concrete machine manufacturer. They are currently dissatisfied with the quality of the current splendid finishing (a part of the concrete machine). Therefore, they have commenced a project to design a more modern and efficient splendid finishing part. The following transactions and events occurred during the 2020 year:
March 2020: Saxton spent $120,000 developing a new splendid finishing part, including the production of a basic model. However, the newly designed model of the splendid finishing part was not successful, because it was not as efficient as required.
July 2020: Saxton spent $110,000 refining and testing a new splendid finishing part. The tests showed the new splendid finishing part produced better quality finishing than those currently available in the market. Accordingly, Saxton was now convinced that it had a viable splendid finishing part.
September 2020: After receiving positive feedback from existing and potential clients, Saxton incurred further costs of $45,000 to fine tune splendid finishing part. Saxton is now very confident that there is a large market for the new splendid finishing part.
REQUIRED
Identify whether each of the above amounts should be expensed or capitalised as an intangible asset. Justify your treatment using the requirements of AASB138: Intangibles Assets.
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