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Question 2 Intangible Assets (19 marks) XYZ Ltd has several intangible assets to report at 30 June 2018 as follows Research and development asset at
Question 2 Intangible Assets (19 marks) XYZ Ltd has several intangible assets to report at 30 June 2018 as follows Research and development asset at recoverable amount S250 000 Trademark at cost $1 000 000 Masthead of a newspaper at directors' valuation S1 300 000 Additional information: The research and development asset comprises the following expenditure incurred in the research phase: $120 000, and in the development phase: $72 000. The development costs meet the test for capitalization contained in AASB 138 'Intangible Assets'. The estimated recoverable amount for the development project is $250 000. No amortization is required under AASB 138 until commercial production starts (scheduled to start in 2020). XYZ Ltd purchased a trademark for $1 000 000 2 years ago, which can be renewed indefinitely, subject to continued use. The management believed that the trademark could be sold for a minimum of $2 500 000. Within the last year, the company has spent considerable time and resources in total S500 000 establishing a new national newspaper. Based on current figures, its circulation is expected to steadily increase for the foreseeable future years and directors have revalued the masthead to $1 300 000 which is what they estimate they could sell it for in the current economic conditions. REQUIRED: (1) For each asset, specify how it should be reported (i.e., capitalized or expensed) by XYZ Ltd in accordance with the requirements of AASB 138 Intangible Assets'. Provide justification. (2) For each asset, specify and provide justification for the following accounting decisions: (i) The appropriate measurement basis (identify any choices that may be available to the management of XYZ Ltd, i.e., cost model or revaluation model.), and (ii) Whether the asset is subject to amortization. (3) Calculate the carrying amount of each asset for the current year ended 30 June 2018. Question 2 Intangible Assets (19 marks) XYZ Ltd has several intangible assets to report at 30 June 2018 as follows Research and development asset at recoverable amount S250 000 Trademark at cost $1 000 000 Masthead of a newspaper at directors' valuation S1 300 000 Additional information: The research and development asset comprises the following expenditure incurred in the research phase: $120 000, and in the development phase: $72 000. The development costs meet the test for capitalization contained in AASB 138 'Intangible Assets'. The estimated recoverable amount for the development project is $250 000. No amortization is required under AASB 138 until commercial production starts (scheduled to start in 2020). XYZ Ltd purchased a trademark for $1 000 000 2 years ago, which can be renewed indefinitely, subject to continued use. The management believed that the trademark could be sold for a minimum of $2 500 000. Within the last year, the company has spent considerable time and resources in total S500 000 establishing a new national newspaper. Based on current figures, its circulation is expected to steadily increase for the foreseeable future years and directors have revalued the masthead to $1 300 000 which is what they estimate they could sell it for in the current economic conditions. REQUIRED: (1) For each asset, specify how it should be reported (i.e., capitalized or expensed) by XYZ Ltd in accordance with the requirements of AASB 138 Intangible Assets'. Provide justification. (2) For each asset, specify and provide justification for the following accounting decisions: (i) The appropriate measurement basis (identify any choices that may be available to the management of XYZ Ltd, i.e., cost model or revaluation model.), and (ii) Whether the asset is subject to amortization. (3) Calculate the carrying amount of each asset for the current year ended 30 June 2018
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