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Question 2 Intangible Assets (10 marks) ABC Ltd has three intangible items as at 30 June 2021 and additional information of such intangible items is
Question 2 Intangible Assets (10 marks) ABC Ltd has three intangible items as at 30 June 2021 and additional information of such intangible items is as below: - Brand name: ABC Ltd spent considerable resources developing a brand name with a total cost $60,000 for the last two years. The Managing Director believes that the brand name can be used for 10 years with no residual value and the current value of the brand name is $120,000. - Goodwill: On 1 July 2019, ABC Ltd acquired a company and recognised goodwill $310,000. The Managing Director estimated the economic benefits associated with the goodwill are expected to last for 10 years and decided to amortise goodwill on the straight-line basis. - Research and development asset: The research and development asset relates to a new type of three-finned surfboard. During the research phase, an expenditure of $80,000 was incurred. The following expenditure was incurred in the development phase: $120,000 on testing and refining a certain type of fin, and $250,000 on developing and testing a prototype of the three-finned board. The development costs met the test for capitalisation as required in AASB 138. As at 30 June 2021, the estimated recoverable amount of this project is $400,000. There is expected to be a very large market for the product and profitable sales are expected for a total of five years after commercial production is scheduled to commence in September 2021. Some of the treatments by ABC Ltd may be inconsistent with the accounting standards AASB 138 "Intangible Assets". REQUIRED: (1) For each item, specify how it should be reported (i.e., capitalized or expensed) by ABC Ltd in accordance with the requirements of AASB138 'Intangible Assets'. Provide justification for your decisions. (2) For each item, specify the appropriate measurement basis (i.e., cost model or revaluation model) in accordance with the requirements of AASB138 'Intangible Assets'. Provide justification for your decisions. (3) Calculate the carrying amount of each item for the current year ended 30 June 2021
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