Question 4 The followings are three independent situations. 1. On 30 June 2016, Santonada Bhd purchased a patent for RM1,200,000. The expected useful life of the patent is 10-year with no residual value. Santonada Bhd uses the straight line amortization method for all intangible assets. On 31 December 2017, Santonada Bhd chooses to revalue the patent. There is an active market for this particular patent and its fair value on 31 December 2017 is RM1,180,000. 2. In 2016, Rapid Row Bhd submitted a tender to the Government of Malaysia for a tramway project in Kuala Terengganu city centre. At the end of 2016, the company was granted the license to operate the tramway for 15 years beginning 1 January 2017. On 1 January 2014, Rapid Row Bhd has to incur legal and other administrative fees of RM110,000 in relation to the license. Other than that, there are no other costs involved in securing the tender. The fair value of a similar license on 1 January 2017 is RM1 million. 3. On 1 January 2017, Abracadabra Bhd entered into a 5-year franchise agreement with Yoohuu Bhd to operate a health club and spa in Pulau Lang Tengah. At that time, the company has to pay RM500,000 for rights to use the franchisor's logo and technique. Besides, Abracadabra Bhd paid Yoohuu Bhd RM1,500,000 for special equipment to be used in the health club and spa. The equipment can be purchased separately by the holders of the franchise only. The equipment has a useful life of 5 years. Required: Explain briefly the accounting treatment for the year ended 31 December 2017 in each of the above situations. Justify your answer with appropriate journal entries. Question 4 The followings are three independent situations. 1. On 30 June 2016, Santonada Bhd purchased a patent for RM1,200,000. The expected useful life of the patent is 10-year with no residual value. Santonada Bhd uses the straight line amortization method for all intangible assets. On 31 December 2017, Santonada Bhd chooses to revalue the patent. There is an active market for this particular patent and its fair value on 31 December 2017 is RM1,180,000. 2. In 2016, Rapid Row Bhd submitted a tender to the Government of Malaysia for a tramway project in Kuala Terengganu city centre. At the end of 2016, the company was granted the license to operate the tramway for 15 years beginning 1 January 2017. On 1 January 2014, Rapid Row Bhd has to incur legal and other administrative fees of RM110,000 in relation to the license. Other than that, there are no other costs involved in securing the tender. The fair value of a similar license on 1 January 2017 is RM1 million. 3. On 1 January 2017, Abracadabra Bhd entered into a 5-year franchise agreement with Yoohuu Bhd to operate a health club and spa in Pulau Lang Tengah. At that time, the company has to pay RM500,000 for rights to use the franchisor's logo and technique. Besides, Abracadabra Bhd paid Yoohuu Bhd RM1,500,000 for special equipment to be used in the health club and spa. The equipment can be purchased separately by the holders of the franchise only. The equipment has a useful life of 5 years. Required: Explain briefly the accounting treatment for the year ended 31 December 2017 in each of the above situations. Justify your answer with appropriate journal entries