Question 4:

Abu Baker purchased an on-going business for a price of OMR 76000. The agreed valuation of assets and liabilities were as follows:

Premises	55000	Bank Loan	12600
Short-term bonds	9900	Short-term investment	13900
Inventories	1200	Unpaid Electricity	450
Trade Payables	13500	Motor Vehicle	11000
Trade Receivables	6700	Bank Deposits	5600

(a) Calculate the value of goodwill.

In 2019, Abu Baker developed a new product that will be in the market by 2020. In connection with the development of this product, the following costs were incurred in 2019:

• Research and development cost OMR 220000
• Materials and supplies consumed OMR 35000
• Compensation paid to research consultants OMR 25000
• It is anticipated that these costs will be recovered in 2025.

(b) What is the amount of research and development cost that Abu Baker should record in 2019 as an amortization expense.