Question 1; Investment Property 25 marks Guptas Holdings Limited manufactures video games and is currently busy with the following projects (year ended 31 December 2018): Project 1 5 2 3 4 N$000 N$000 N$000 N$000 N$000 Capitalised development costs b/forward Research costs incurred during the year: O Salaries a Directly overheads O Raw material o Market research a Patents and licenses 600 440 and development 90 125 181 98 70 60 150 80 attributable 6 12 6 - 9 20 25 12 25 6 - 5 8 Project 1 The project is completed, and commercial production commenced during the current reporting period. The directors are certain that the carrying amount of the capitalised costs will be covered through future sales of the product. Sales of the product for the year amounted to 30 000 units. Estimates of future sales in units are as follows: 2019 2020 2021 40 000 50 000 60 000 It is estimated that no sales will take place after 2021 Project 2 Initially, this project was highly profitable, but as a result of the release of Sony product which is more advanced than the envisaged product, the success of the project is now considered to be remote. similar Project 3: In previous years N$176 000 was initially recognised as an expense. Due to changes in the market, directors are now, after thorough market research, convinced that the project will in future earn income which will exceed the development costs. For this reason, the directors want to reverse the write-off. Project 4: The project satisfies the requirements for recognition of an intangible asset as from 01 January 2018 and is estimated to continue for three years before the project is complete. Project 5 This project is new, and activities have been limited to research and the formulation of prod Required: natives by engineers Show all the journal entries in respect of the above transactions for the year ended 31 December 2018. Disclose the "development costs note" to the financial statements reconciling the opening balance of developing costs to the closing balance as at 31 December 2018, (a) 15 marks (b) 7 marks Question 1; Investment Property 25 marks Guptas Holdings Limited manufactures video games and is currently busy with the following projects (year ended 31 December 2018): Project 1 5 2 3 4 N$000 N$000 N$000 N$000 N$000 Capitalised development costs b/forward Research costs incurred during the year: O Salaries a Directly overheads O Raw material o Market research a Patents and licenses 600 440 and development 90 125 181 98 70 60 150 80 attributable 6 12 6 - 9 20 25 12 25 6 - 5 8 Project 1 The project is completed, and commercial production commenced during the current reporting period. The directors are certain that the carrying amount of the capitalised costs will be covered through future sales of the product. Sales of the product for the year amounted to 30 000 units. Estimates of future sales in units are as follows: 2019 2020 2021 40 000 50 000 60 000 It is estimated that no sales will take place after 2021 Project 2 Initially, this project was highly profitable, but as a result of the release of Sony product which is more advanced than the envisaged product, the success of the project is now considered to be remote. similar Project 3: In previous years N$176 000 was initially recognised as an expense. Due to changes in the market, directors are now, after thorough market research, convinced that the project will in future earn income which will exceed the development costs. For this reason, the directors want to reverse the write-off. Project 4: The project satisfies the requirements for recognition of an intangible asset as from 01 January 2018 and is estimated to continue for three years before the project is complete. Project 5 This project is new, and activities have been limited to research and the formulation of prod Required: natives by engineers Show all the journal entries in respect of the above transactions for the year ended 31 December 2018. Disclose the "development costs note" to the financial statements reconciling the opening balance of developing costs to the closing balance as at 31 December 2018, (a) 15 marks (b) 7 marks
