remaining a Niger plc is a company that manufactures chocolate bars On 15 January 2020 Niger plc purchased the registered trademark Dairynut from a competitor. The Dairynut chocolate bar was one of the first to ever be sold, having been launched in 1925 and remaining popular ever since. The trademark cost 400,000, and sales have remained steady since Niger plc took over manufacture The CEO of Niger plc felt it was confusing for investors to have one chocolate bar recognised on the Statement of financial position when other chocolate bar brands that were created in-house by Niger were not capitalised She has requested that the Finance Director work out the expenditure on these in house brands and capitalise it along with Dairynut The only other chocolate bar brand purchased by Niger plc is 'Dark Silk' for which it paid 250,000 five years ago Since then dark chocolate has gained in popularity and sales of 'Dark Silk' have more than doubled The CEO feels the brand must have increased in value and has suggested revaluing the brand to reflect this On 1st July 2020 the company commissioned some market research at a cost of 10,000 The market research established that there was demand for a chocolate bar that contained less sugar and fat The Innovation department began developing the new healthy chocolate bar, the 'Lifebar at the beginning of 2020 The initial design work proceeded quickly but when the testing began it was found that the new recipe produced chocolate that was unstable at room temperature, and so far adjustments to the mix of ingredients have failed to solve the problem Development costs at 31st December 2020 had reached $109, 300, including the market research and 20,000 for a new industrial food mixer Requirement a Discuss how the purchase of Dairynut should be treated in the financial statements including how it should be measured subsequently. (3 marks) b. Explain whether the CEO's ideas with respect to the internally generated brands and Dark Silk are acceptable. (3 marks) 7 remaining a Niger plc is a company that manufactures chocolate bars On 15 January 2020 Niger plc purchased the registered trademark Dairynut from a competitor. The Dairynut chocolate bar was one of the first to ever be sold, having been launched in 1925 and remaining popular ever since. The trademark cost 400,000, and sales have remained steady since Niger plc took over manufacture The CEO of Niger plc felt it was confusing for investors to have one chocolate bar recognised on the Statement of financial position when other chocolate bar brands that were created in-house by Niger were not capitalised She has requested that the Finance Director work out the expenditure on these in house brands and capitalise it along with Dairynut The only other chocolate bar brand purchased by Niger plc is 'Dark Silk' for which it paid 250,000 five years ago Since then dark chocolate has gained in popularity and sales of 'Dark Silk' have more than doubled The CEO feels the brand must have increased in value and has suggested revaluing the brand to reflect this On 1st July 2020 the company commissioned some market research at a cost of 10,000 The market research established that there was demand for a chocolate bar that contained less sugar and fat The Innovation department began developing the new healthy chocolate bar, the 'Lifebar at the beginning of 2020 The initial design work proceeded quickly but when the testing began it was found that the new recipe produced chocolate that was unstable at room temperature, and so far adjustments to the mix of ingredients have failed to solve the problem Development costs at 31st December 2020 had reached $109, 300, including the market research and 20,000 for a new industrial food mixer Requirement a Discuss how the purchase of Dairynut should be treated in the financial statements including how it should be measured subsequently. (3 marks) b. Explain whether the CEO's ideas with respect to the internally generated brands and Dark Silk are acceptable. (3 marks) 7
