QUESTION 3 (25 Marks: 45 Minutes) Ignore VAT Intaka Limited is a company creating new innovative products for outdoor birding and hiking in the Eastern Cape. The company's current reporting period is 31 March 2021. The company has been developing a brand of outdoor equipment, Jonga Ngaphandle which includes a flexible tripod (a stand with 3 legs), camera and field guides is its main product design. Management have decided to register a patent for Jonga Ngaphandle which will be finalised in the following financial year. Relevant research and development costs relating to Jonga Ngaphandle during the financial year ended 31 March 2021: From 1 April 2020 to 31 May 2020 market surveys were conducted to establish the demand for the product costing R123 000. It was established that outdoor lovers were very enthusiastic about the new product. An assessment of the improvements to the product package was evaluated which cost R385 000 and was completed by 9 July 2020. Thereafter a plan was put together with the design accepted on 31 August 2020. The pilot manufacturing plant was completed on 31 December 2020 costing R1 685 000. Testing of the pilot plant was conducted costing R270 000 until 31 March 2021, which will continue after the year end, till ready for use The warranty provision calculation presented to you at 31 March 2021: Balance on 31 March 2020 Costs incurred for warranties in 2021 Provision raised for 2021 Balance on 31 March 2021 Rand 12 600 (11 400) 15 300 16 500 In the 2020 financial year, products returned for a refund, in terms of the warranty policy, approximate about 3% of sales. The Chief Executive Officer has asked you to maintain a low provision. He is satisfied with a provision of R16 500. In the 2021 financial year, product sales amounted to R440 000. It is estimated that 5% of sales will be returned for refunds. All products are sold with a one-year warranty agreement. At 31 March 2021 the warranties for the 2020 year had lapsed and no further cost will be incurred in respect of those sales. All amounts are material. REQUIRED: 1. Discuss with reference to IAS 38, Intangible Assets, the correct accounting treatment the research and development costs in relation to the Jonga Ngaphandle patent for ti financial year ended 31 March 2021. (15 Mark 2. Comment on the recognition and measurement of the warranty provision calculation 31 March 2021 and provide any adjusting journal entry required if you are not in agreeme with the provision raised. Base your answer on the conceptual Framework and IAS 3 Provisions, Contingent Liabilities and Contingent Assets and recommend a suitab provision (8 Mark Communication skills: logical argument, format and layout (2 Ma QUESTION 3 (25 Marks: 45 Minutes) Ignore VAT Intaka Limited is a company creating new innovative products for outdoor birding and hiking in the Eastern Cape. The company's current reporting period is 31 March 2021. The company has been developing a brand of outdoor equipment, Jonga Ngaphandle which includes a flexible tripod (a stand with 3 legs), camera and field guides is its main product design. Management have decided to register a patent for Jonga Ngaphandle which will be finalised in the following financial year. Relevant research and development costs relating to Jonga Ngaphandle during the financial year ended 31 March 2021: From 1 April 2020 to 31 May 2020 market surveys were conducted to establish the demand for the product costing R123 000. It was established that outdoor lovers were very enthusiastic about the new product. An assessment of the improvements to the product package was evaluated which cost R385 000 and was completed by 9 July 2020. Thereafter a plan was put together with the design accepted on 31 August 2020. The pilot manufacturing plant was completed on 31 December 2020 costing R1 685 000. Testing of the pilot plant was conducted costing R270 000 until 31 March 2021, which will continue after the year end, till ready for use The warranty provision calculation presented to you at 31 March 2021: Balance on 31 March 2020 Costs incurred for warranties in 2021 Provision raised for 2021 Balance on 31 March 2021 Rand 12 600 (11 400) 15 300 16 500 In the 2020 financial year, products returned for a refund, in terms of the warranty policy, approximate about 3% of sales. The Chief Executive Officer has asked you to maintain a low provision. He is satisfied with a provision of R16 500. In the 2021 financial year, product sales amounted to R440 000. It is estimated that 5% of sales will be returned for refunds. All products are sold with a one-year warranty agreement. At 31 March 2021 the warranties for the 2020 year had lapsed and no further cost will be incurred in respect of those sales. All amounts are material. REQUIRED: 1. Discuss with reference to IAS 38, Intangible Assets, the correct accounting treatment the research and development costs in relation to the Jonga Ngaphandle patent for ti financial year ended 31 March 2021. (15 Mark 2. Comment on the recognition and measurement of the warranty provision calculation 31 March 2021 and provide any adjusting journal entry required if you are not in agreeme with the provision raised. Base your answer on the conceptual Framework and IAS 3 Provisions, Contingent Liabilities and Contingent Assets and recommend a suitab provision (8 Mark Communication skills: logical argument, format and layout (2 Ma