QUESTION 2

(a) LBS Company commenced the development stage of the new technology on 1 October 2021, $12,000 per month was incurred until the project completed on 31 December 2023 and ready for immediate production.

Required:

(i) Use the information as above to explain the accounting treatments for the above cost for the year ended 31 December 2021.

(ii) Apply the IAS 38 Intangible Assets, explain tthe recognition criteria of development costs as assets.

(b) AXB Company entered into a contract to acquire the franchise from Lovey Dovey Coffee on 1 March 2021 and the reporting year end of AXB Company is 28 February 2022. AXB has to pay $500,000 for the franchise and this allowed the company to sell the coffee for 3 years. Additionally, AXB rented a shop at $5,000 per month and bought furniture and equipment from the franchiser for $150,000.

Required:

Use the information as above to explain the accounting treatments for the franchise arrangement and show the extract of the financial statement for the year ended